Medicaid Planning for Single People

When an individual enters a nursing home, it is an emotional and traumatic time for the individual and the family. That is especially true for a single person. There are so many life-altering financial and health-care decisions to be made that it can be overwhelming trying to handle things alone. On top of that, nursing homes cost an average of $6000 to $9000 per month. It's no wonder that the family is under great stress!

There is only one governmental program that can help offset the catastrophic high costs of nursing home costs, the Medicaid program. The rules for Medicaid are complex and very biased toward married couples. It is terribly difficult for a single person to qualify.

A single person cannot have more than $1500 in assets in order to obtain Medicaid benefits. The rest of the assets, whether cash, stocks, mutual funds, retirement funds, life insurance cash value, or even real estate, must be spent or planned with in order to qualify for Medicaid. If you do nothing, you will spend ALL of your money paying for the nursing home.

The most common plan is to gift some assets to other individuals, like children or siblings. Medicaid allows gifts to be made, but their assumption is that the individual making the gift is trying to qualify for benefits (probably true!). As a result, there is a penalty period imposed after a gift for a number of months during which Medicaid is not available. The length of the penalty period depends upon the value of the gifted assets. You can deal with the penalty period by very sophisticated Medicaid planning so that money is available.

The bigger problem with gifting is you have to GIVE AWAY MONEY! Your children or other beneficiaries may give it back to you if you ever need it, or, they may not. They may die or get divorced and your son or daughter-in-law will have your money. Your beneficiaries may have creditors who take the money, or they may simply spend it. That's a great risk to you.

One alternative solution is to gift your money into an Irrevocable Medicaid Trust. Once your money goes in, you can no longer get the principal back, so neither can the nursing home. However, you can mandate that you receive all the interest or dividend income. Many older folks don't spend the principal anyway, and only need the earnings to live on. One or more of your children or other ultimate beneficiaries must be the Trustee in charge of the funds. However, the funds are not theirs, and they cannot access the funds until after your death, when they inherit the trust assets. Once the required penalty period is over, Medicaid will be available to pay for the monthly cost of nursing home care.

Medicaid is a complex area. Please seek professional guidance from an attorney who regularly practices in this field for more information.