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May 31, 2007
PROTECTING ASSETS FROM NURSING HOME COSTS
It’s been more than a year now since the February 8, 2006 passage of the Deficit Reduction Act (DRA). Slowly, and I mean very slowly, seniors are learning about how this law adversely affects all seniors, except the super rich.
The most significant change in the Medicaid rules is the elimination of the half-a-loaf. The half-a-loaf was the name given to a plan where someone who was either in a nursing home or was expecting to be in one soon, could give away about half of their assets, while retaining the other half to pay for the disqualification period for giving the other half away.
The new law says that if you enter a nursing home and spend all of your remaining money on nursing home costs, the government will then look back up to 5 years to see if you made any gifts. If you did, the government will tell you to get it back! Once you get it back and pay it to the nursing home, then you will be eligible for MassHealth (Medicaid).
Now, if you’re like most people, you have made some gifts in the past. You might have helped your child, or grandchild with college expenses, or maybe you gave a substantial gift to your church. If you get sick, just about any gift could cause problems. To me, one of the more troublesome aspects of this law change is; When is the government going to explain this law change to the citizens of this country? From my perspective, it seems as though no one knows about this law change!
For over a year now, attorneys and Medicaid “experts” have been trying to come up with a replacement planning tool for the half-a-loaf, without much luck. The most recent last minute planning technique is called the personal care contract. This is an agreement between the parent and child to pay the child for services rendered to the parent. These agreements might save some of the elder’s money, but are in no way as secure as the former half-a-loaf. These caregiver agreements must pass muster with the Division of Medicaid to be allowed, without going to court for a hearing.
The affect of this law is to require advance planning on the part of anyone who seeks to protect any of their hard earned assets. The problem is that not everyone wants to give up their assets, or control over their assets at a time when they are retired and on a fixed income.
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