People tend to avoid the discussion of estate planning because no one likes to think about their mortality. Plus, there’s the presumption that only the wealthy have an “estate” that needs planning.
But many moderate-income families may have a very special need to do some simple estate planning. If they arrange their assets properly, they can make sure that if one spouse needs custodial care, the other spouse can still live a comfortable life.
Wealthy people buy long-term care insurance, or decide they have enough assets to cover the cost of private care, either in-home or in assisted living. (Medicare will only provide skilled nursing home care for up to 100 days — and then only if the patient is moved directly from a hospital.)
That leaves a big gap for many families with more moderate incomes and assets. Their savings could disappear in a flash if they need full-time care. Family members often provide help. But there’s another way to get both care and peace of mind: using a specialist lawyer to pre-arrange your assets.
Understanding Medicaid
Medicaid is a federal/state program, administered by each state with its own regulations. In addition to providing health care to the poor, it is designed to provide long-term custodial care to those who have spent their assets. Each state has its own rules for spending down assets and using income from pensions, Social Security, savings or a spouse’s income.
For example, a single individual who needs nursing home care to be paid by Medicaid in Illinois this year must qualify by having income (including Social Security, pensions, IRA distributions and rental income) under $1,215 per month and own assets under $2,000.
But in the case of a married couple, the law realizes it does no good to impoverish the spouse who is well. So, each state sets its own rules about allowable spousal income and assets for the “community spouse.” For example, in Illinois in 2023, that income allowance is $2,000 per month, plus assets totaling no more than $120,780. But a waiver could increase that income limit to $3,715.50 per month.
Florida does not allow an applicant to own countable assets worth more than $2,000. However, if the applicant’s income is under $856 per month, the asset limit jumps to $5,000. In Florida, the “community spouse” can retain up to $148,620 in individual or joint assets in addition to the family home.
Working Lunch
Weekdays
Get the latest business news headlines, delivered to your inbox midday weekdays.
In most states, the community spouse may keep the family home regardless of value. But after death, a single homeowner can expect that the state will attempt to recoup its Medicaid costs from his or her estate.
How Medicaid planning can help
As you can see from this brief overview, Medicaid planning is a quagmire and requires a sharp lawyer in your state of residence to deal with issues of income, assets and home ownership. Complicating the process is the fact that it’s difficult to predict which spouse will need care first. Transferring assets at the last minute to qualify for Medicaid results in penalties, since states can “look back” at least five years to catch illegal transfers. But Florida is among the states that allow transfers between spouses, an essential element in the planning process.
You need a qualified elder law attorney in your state of residence to manage this process. Joannie Rodriguez is a Florida Bar Board-Certified elder law attorney in Orlando, Florida. She says her practice is as much about preserving peace of mind as it is about saving the family’s hard-earned nest-egg, while providing the best quality of care for the longest time — and protecting the community spouse.
Rodriguez makes no apologies for doing this type of planning, saying: “This is not about taking advantage. I am helping people qualify for benefits they are entitled to receive but might not know about.” She strongly advises people to “plan while you are capable of making your own decisions.”
To find a trusted senior estate planning attorney in your state of residence, visit NAELA.org, the website of the National Academy of Elder Law Attorneys. Done correctly, this kind of planning is about having peace of mind for yourself and your family at the end of your life, no matter what your level of assets and income. And that’s The Savage Truth.
(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)
