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August 18, 2005
Unraveling Joint Assets
I received a question from one of my readers, I’ll call them “Tom” and “Sue”. The question is summarized as follows:
I am single and have lived with my dear friend for many years. I own a condo in my name alone and have long term care insurance. Our cash assets are in several accounts, some in my name alone, some in my friend’s name alone, and some held jointly. What would happen if one of us needed nursing home care?
Nursing home care is paid for in one of two ways. Either MassHealth pays, a single person must have less than $2,000 for that, or you privately pay. Right now the cost per day for a nursing home room is between $270 and $325. Because both of you have over $2,000, neither would qualify for MassHealth.
Let’s start off with friend “Tom” being the one who needs nursing home care and his friend “Sue” the healthy one who remains at home.
THE REAL ESTATE: The condo is in “Tom’s” name alone but, “Tom” has a long term care insurance policy. If, on the day you enter the nursing home, you own a qualified long-term care insurance policy, your home will be an exempt asset and not subject to lien by MassHealth. That’s good news, because that means that you do not have to transfer away your property to protect it. You can keep it until you die and have it disposed according to your will. There is one exception to this rule that you need to be aware of.
Most long-term care insurance policies contain a provision that would pay for care you receive at home. If you had purchased a minimum policy consisting of 2 years of coverage and $125/day benefit and you use even one day of home care. Your policy is now a non-qualified policy because on the day you enter the nursing home you will not have a full 2 years of coverage remaining.
House Bill #3100 offered by Representatives Teahan, Festa, Sullivan, Grant and Peisch would fix that problem. Under this Bill, if you purchase a qualifying policy, your home will be an exempt asset even if you use home care benefits. We have long been advocating that if you buy a long-term care insurance policy that you have the right to know at the time of purchase whether your home is protected. I feel that passage of this Bill will enhance sales of long-term care insurance and will result in savings to the Commonwealth. I ask that you call you legislators and tell them how you feel about this.
So, assuming that “Tom” does not use any home care benefits, “Sue” will continue to be able to live in the house. The house would be exempt. Otherwise the house would have to be sold and the proceeds spent down to below $2,000 for “Tom” to be eligible for MassHealth. It is also possible that “Sue” might be able to continue to live there by an agreement with MassHealth that a lien be placed on the property.
A lien being placed against the property is not necessarily a bad thing. How, can having a lien be put on your property be a good thing? You’ll be surprised!
Let’s say that “Tom” has monthly income of $1,000 and that “Tom” is at Jewish Rehab Center in Boston. The cost is $325 per day. But, instead of private paying, MassHealth is paying and putting a lien on the home. Let’s also say that although “Tom” needs nursing home care, his needs are not that great.
MassHealth reimburses nursing homes based upon levels of care. The more care you need, the higher the reimbursement rate. Let’s also assume that the Level 1 Care reimbursement rate is $100 per day (I understand that it is about $96 per day). This means that MassHealth would have a lien of about $3,000 per month and when you subtract the $1,000 income of “Tom” would result in a $2,000 lien per month. Upon the death of “Tom” or upon “Sue” moving out the property would be sold and MassHealth paid. This is a far better result than paying $325 per day and having to sell the home. Of course if “Tom” needed a great deal of care and the nursing home was being reimbursed at the highest level of care, the lien would grow at a much faster rate, potentially eating up the entire property.
CASH ASSETS: When friends mingle, co-mingle, divide and re-divide up cash from their assets and income there really is no scientific method of deciding what belongs to who. You have to rely on old-fashioned common sense. If all of the money originally came from the sale of the condo of “Sue”, who then moved in with “Tom” then common sense tells us that the money started off as belonging to “Sue”.
MassHealth will look back three years to see what accounts “Tom” owns. They will also look at any joint account that his name appears on. They count 100% of any bank account that his name appears on, even if it is jointly owned. If you are able to prove that the funds in a joint account belong to “Sue”, they will not count the joint account. The burden of proof is on you to prove that it does not belong to the nursing home resident.
My advice with regard to the bank accounts is to separate them according to the rule of common sense or in any other agreeable manner. If you do this now and neither of you needs nursing home care within the next three years, it will not be subject to review by MassHealth because they may only look-back 3 years.
OTHER PLANNING ITEMS:
The two most important documents for you to have are the durable power of attorney and health care proxy. These will allow each of you to deal with the other’s property and make their health care decisions if they were to become ill.
You might consider making a will containing a testamentary trust so that if one of you were to die unexpectedly, all of the assets could go to a trust for the benefit of the other. The benefit of the testamentary trust is that even though the assets are available for the survivor, they will not be counted as belonging to the survivor in the event that the survivor ever needs nursing home care.
If you have a question, send it in! It might end up in next week’s newspaper.
There are many MassHealth regulations and exceptions to those regulations that are beyond the scope of this article. Prior to making any change in the way that you hold your assets or changing your estate plan, please seek competent advice.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org