Medicaid Planning
Ohio Medicaid Products
The Medicaid spend down process can be a very difficult procedure for Ohio families. Without proper planning, a healthy spouse and/or the estate’s beneficiaries will often be left with few remaining assets.
Fortunately, families facing this crisis have valuable options available to them. Our agency aims to be ahead of changing legislation in order to provide workable solutions to families facing the spend down process. Using our extensive knowledge base from pervious experiences, we work diligently to shelter assets and protect estates whenever possible. Contact us for a consultation and/or to gather product information.*
The Deficit Reduction Act
In passing the “Deficit Reduction Act of 2005″, Congress made it more difficult to qualify for Medicaid benefits than under the previous regulations. Once adopted by the individual states, the new rules present challenges to those who attempt to transfer, hide or otherwise dispose of assets in order to keep them from Medicaid recapture.
A brief synopsis of the new legislation illustrates many important changes. The “look back” period has been extended from three years to five years. The divestment penalty period has changed, potentially resulting in longer waiting periods for qualification. The decreased limit on the allowable home equity allowance is now $500,000. Additionally, last minute gifting from the estate has been eliminated. In essence, the federal government has closed perceived loopholes in the system.
Products Designed to Avoid Recapture
Insurance companies understand that seniors desire to shelter and transfer their remaining assets to beneficiaries. Accordingly, insurance carriers have created products designed to avoid Medicaid recapture. Currently, there are a small number of companies offering effective policies in the Medicaid marketplace. The following offers a snapshot of the various plans assisting Ohio families. (We can implement all of the plans listed below. Contact us by phone or e-mail and we can discuss your situation or send you information on these products.)
The Irrevocable Funeral Trust
Oftentimes, this is a policy and plan used before any other. According to Medicaid regulations, the cash value in almost all life insurance policies is considered a countable asset. Simply put, the cash value of life insurance must be spent down before an individual might be considered for government assistance. Currently, this is not the case with life insurance used to fund an Irrevocable Funeral Trust.
Current laws allow persons on Medicaid to retain assets for a proper funeral. Unfortunately, these amounts are usually woefully inadequate. However, a life policy used with an Irrevocable Funeral Trust allows for a lump sum deposit upwards of $35,000 per individual. These funds are designed to be untouchable by creditors. At passing, funds are paid to the funeral home first and the residual amount is distributed, income tax free, to the beneficiaries. Using this technique, a family will have sufficient funds for the deceased’s funeral and quite possibly several thousand dollars in excess funds for the estate’s beneficiaries.
The Medicaid Annuity
The oldest and most popular plan is the “Medicaid friendly” annuity policy. Before the recent legislation, the use of annuities was quite common. New restrictions make them less available than before, but in certain situations they can be invaluable to a husband and wife.
The annuity plan must have special language preventing transfers worded in the policy. If the correct policy is used, there are instances when the annuity will not be counted during the Medicaid spend down process. This way the annuity income can be available to a well spouse for his or her living expenses. However, if the account has not been set up correctly and annuitized under specific criteria, before institutionalization has occurred, then it may be of little benefit to the well spouse and/or estate.
Accordingly, it is important to work with an educated agent, an elder law attorney familiar with the current legislation and the appropriate annuity policy to get the most benefit from this plan. When used properly, this powerful tool can save families tens of thousands of dollars.
Medicaid Crisis Planning With Life Insurance
The latest innovation in asset protection is a form of single premium life insurance. Designed to transfer a creditor-protected stream of income to beneficiaries, this new life policy may not be considered as a countable asset for Medicaid purposes.
This is a guaranteed issue life insurance policy meaning no medical underwriting is necessary for the insured. The policy has several unique factors. It is designed to be non-assignable, irrevocable, non-commutable and to have no cash value. Furthermore, no loans, surrenders, beneficiary changes or other adjustments are allowed to the policy once it is in force (after the allotted 20 day “free look” period provided by the Ohio Department of Insurance). Only non-qualified money will be accepted by the insurance company and the issue ages range from 45 to 90 years old.
After the passing of the insured, the policy funds are paid out as a monthly stream of income to the named beneficiaries in one of three ways: for the entire life of the beneficiary, life with a ten year period certain or ten year temporary life. One of these three income choices is selected on the application. The first two options guarantee income the beneficiary cannot outlive while the third does not. In this way, the life policy pays out like an immediate annuity.
The policy has much of the same language as the aforementioned Medicaid Annuity and Irrevocable Funeral Trust policies. A significant difference, however, is single premium life insurance is designed for those starting or currently involved in the Medicaid spend down process.
The single premium policy is designed to help individuals qualify for government assistance programs earlier. The life insurance policy can prevent premium dollars, normally subject to the spend down process, from attachment. In theory, an individual may be able to protect and pass on a portion of their estate and still be eligible for government assistance. Thus, this product may only be helpful for the preservation of an estate in certain situations. It is recommended that families review this policy with an elder law attorney before implementation.
In summary, Ohio seniors have several options available to them in order to protect their assets, their estates and their loved ones. Our agents can tailor a plan to fit your needs and the needs of your spouse and family. By employing certain preventive measures, many families can avoid the mental and financial anguish associated with long term care expenses and the Medicaid spend down process.
*The following in not intended as legal advice. Every Medicaid spend down situation is unique and may require the assistance of an elder law attorney. Insurance products are not guaranteed to avoid recapture. While many policies are working as intended, future changes in legislation or future litigation may render these plans obsolete. A consultation with an elder law expert is almost always recommended.
