Massachusetts Medicaid Planning Guide
- LONG TERM CARE MEDICAID PROGRAMS IN MASSACHUSETTS
- Ten Common Mistakes When Planning For Medicaid
- 1. NOT PLANNING AHEAD
- 2. GIFTING ASSETS TO THE KIDS
- 3. GIFTS UNDER THE GIFT TAX EXEMPTION AMOUNT ARE ALLOWED BY MEDICAID
- 4. NOT HAVING A WELL-DRAFTED DURABLE POWER OF ATTORNEY
- 5. NOT HAVING A WELL-DRAFTED ESTATE PLAN
- 6. NOT TAKING ADVANTAGE OF SPOUSAL PROTECTIONS
- 7. NOT TAKING ADVANTAGE OF MEDICAID ELIGIBILITY EXCEPTIONS
- 8. NOT PLANNING FOR ESTATE RECOVERY
- 9. ASSUMING IT’S TOO LATE TO PLAN
- 10. NOT CONSULTING WITH AN ELDER LAW ATTORNEY
LONG TERM CARE MEDICAID PROGRAMS IN MASSACHUSETTS
The Medicaid program in Massachusetts is known as MassHealth. Long term care (LTC) benefits are administered through a program called MassHealth Standard. This program provides comprehensive care services for qualifying individuals in nursing homes or at home.
In order to qualify for LTC MassHealth Standard an individual must need assistance with at least three activities of daily living such as bathing, eating, dressing, toileting, and getting in and out of bed. In addition, an individual must qualify financially by meeting stringent asset and income limits.
LTC programs administered through MassHealth Standard that provide care at home or in the community for individuals who would otherwise be in the nursing home include the following:
- Home and Community Based Waivers and the Frail Elder Waiver – applicants must be between 60-64 years of age and disabled or over age 65. Services provided include home health aides, grocery shopping, meals, medication dispensing system, house cleaning, laundry, transportation.
- Adult Day Health Care – supports qualifying elders and disabled individuals with essential care during the day at adult day care centers. Services include, assistance with activities of daily living, meals, skilled care, medication management, counseling, social, therapeutic and recreational activities.
- Personal Care Attendant (PCA) – provides a personal care attendant chosen by the MassHealth recipient to provide assistance with activities of daily living, meal preparation, housekeeping, shopping, and transportation. The PCA may be a family member.
- Enhanced Adult Foster Care/Caregiver Homes Program – qualifying elders or disabled individuals can either reside in a caregiver’s home or the caregiver can reside in the recipient’s home and provide 24/7 assistance with activities of daily living, meal preparation, medication management, and anything else the individual may need. Typically the caregiver is a family or friend but that is not a requirement of the program. The caregiver cannot be the spouse, parent of a minor, or legal guardian. MassHealth pays the caregiver for the services provided but it does not pay for room and board. The recipient is expected to pay between $420 to $580 per month in room and board, although many family-caregivers do not charge room and board.
- Group Adult Foster Care (GAFC) and SSI-G – is available to low-income elders and will pay for personal care services, medication management, and transportation in certain, state-approved assisted living facilities. The program does not include room and board. However, the individual may also qualify for Supplemental Security Income Assisted Living Benefit (SSI-G) which is a program administered by Social Security that will assist with room and board expenses.
With very few exceptions, all income of an individual applying for LTC MassHealth (called the “applicant”) is counted for eligibility purposes. But only the income of the applicant is counted. The spouse’s income is not counted. Under the Home and Community Based Waiver programs the income limit for 2020 is $2,349. When an applicant will reside in a nursing home their income is paid to the nursing home to offset the amount of care MassHealth is paying for. However, certain allowances are permitted. The applicant is allowed to keep a whopping $72.80 per month for their personal needs and retain an amount equal to their monthly health insurance premiums.
The applicant’s spouse living at home or in an assisted living facility (called the “community spouse”) is entitled to keep a minimum of $2,155 (in 2020) of the applicant spouse’s income. This is called the Minimum Monthly Maintenance Needs Allowance (MMMNA). The community spouse may be entitled to keep a maximum of $3,216 of the applicant’s income if needed for housing expenses.
An applicant age 65 and over, regardless of whether they are single or married, can only have $2,000 in countable assets in their name, $3,000 for eligible married couples. Individuals under age 65 living in the community do not have an asset limit, but all income produced by the asset is countable as income, necessarily reducing the amount of liquid countable assets that the individual may have. All institutional individuals of any age have an asset limit of $2000. “Countable assets” generally include all financial assets (bank accounts, investments, stocks, bonds, CD’s, IRA’s, 401(k)’s), real estate (except the primary residence) and life insurance policies with a cash surrender value over $1,500. It does not include the applicant’s primary residence up to $893,000 in equity (discussed in further detail below), personal possessions such as jewelry, clothes and furniture, and one car per household provided it is used for the members of the household.
The applicant’s home is not a countable asset if the equity in the home is below $893,000, the spouse or minor or a disabled child lives in the home. But further asset protection planning may be necessary to protect the home for the community spouse, minor or disabled child. In Massachusetts, where housing prices are high, it is possible that an applicant with no mortgage on their home could exceed the equity limit. In that case and if none of the exceptions apply, the home could be considered a countable asset.
MassHealth will also place a lifetime lien on the home for institutional level services received at any age and community level services received age 55 and over. The lien may result in MassHealth requesting to be reimbursed for care provided to the applicant if the house sells during the applicant’s lifetime, or through the probate estate of the applicant upon death. Many advocates believe that MassHealth cannot collect on its lien until the death of the applicant, even if the house is sold during the applicant’s lifetime. Otherwise the lien terminates upon the applicant’s death.
Excess assets may be transferred to the applicant’s spouse living in the community (called the “community spouse”) without penalty. As of January 1, 2020, the community spouse is allowed to keep a maximum of $128,640 of the couple’s combined countable assets, excluding the home. This is called the Community Spouse Resource Allowance (CSRA). For example, if the couple has combined countable assets of $100,000 on the day the applicant goes into the nursing home, the community spouse would be allowed to keep the entire amount. If the couple has combined countable assets of $200,000, the community spouse could only keep the maximum $128,640 and the nursing home spouse could keep $2,000. The remainder would have to be spent down or placed in an annuity for the benefit of either spouse, but usually for the healthier spouse living in the community so that it will not need to be spent for nursing home care for the ill spouse.
The Five Year Lookback Rule
There are strict limitations on transfer of assets for less than fair market value when applying for LTC MassHealth, with a disqualification period based on the amount transferred and the cost of nursing home care on the date the applicant goes into a nursing home. MassHealth “looks back” at transfers or gifts made within 5 years of the date of eligibility. If an individual applies for MassHealth before the 5 years has expired, the transfer will result in a disqualification period, which is a period of time that MassHealth will not pay. Once the application is filed within the five-year look back period, MassHealth will calculate the entire penalty period based on the amount transferred, even if the penalty period exceeds five years after transfer.
But there are limited exceptions to this rule. Transfers or gifts made to the following recipients will not trigger a penalty period:
- A spouse;
- A blind or disabled child;
- A certain trust for the benefit of a blind or disabled child; and
- A certain trust for the benefit of a disabled individual under age 65.
There are special rules that apply to transfers of a home. In addition to transfers to the above-referenced recipients, the home may also be transferred penalty-free to:
- A child under age 21;
- A sibling who has lived in the home during the year preceding the applicant’s entry to the nursing home and who already owns an equity interest in the home; and
- A caretaker child, defined as a child of the applicant who has lived in the home for at least two years prior to the applicant going into the nursing home and who provided care to the applicant during that time, and thus prevented the applicant from needing nursing home care sooner.
Ten Common Mistakes When Planning For Medicaid
1. NOT PLANNING AHEAD
Medicaid planning requires planning ahead. Many folks believe they will “never go to a nursing home” or they don’t start planning until they’ve been diagnosed with a debilitating illness like Alzheimer’s disease. But the fact is nobody has a crystal ball. You don’t know what your long term care needs will be until it happens. It is critical to plan ahead to take advantage of proper planning techniques such as Asset Protection Trusts or Family Irrevocable Trusts, Unless an exception described above applies, properly transferred assets are not fully protected until 5 years have passed, under the Medicaid 5 year look back rule.
2. GIFTING ASSETS TO THE KIDS
Often times, when clients come in for Medicaid planning, the first thing they say is: “I want to get everything out of my name and give it to my kids”. Particularly, clients want to add their kids’ names to their deed or just give them the house. This is fraught with many problems. You will be expected to private pay during this time. The transfer is a gift under the Medicaid regulations subject to the 5 year look back rule. The transfer is also a loss of control and ownership for you. In addition, there may be tax implications for you and your children if you are no longer the 100% owner. Your children’s ownership interest could be subject to their creditors or a divorce. If you have a mortgage, the mortgage company may object to you transferring all or a portion of the property to your children since they are not on the mortgage.
3. GIFTS UNDER THE GIFT TAX EXEMPTION AMOUNT ARE ALLOWED BY MEDICAID
The gift tax laws and the Medicaid laws are two completely different animals and they do not play well together in the sandbox. Under the federal gift tax law, gifts of assets under $15,000 do not have to be reported. In contrast, under the Medicaid regulations transfers of assets for no consideration or for less than fair market value are considered gifts and will result in a disqualification period unless the applicant is gifting to a spouse and the spouse’s assets are under the CSRA (discussed above), properly drafted special needs trust or to a qualifying disabled individual. Massachusetts does not have a gift tax and the federal individual “lifetime” gift tax exemption is far above the amount that would be given under this situation, so generally speaking, gift taxes are not an issue in asset protection planning.
4. NOT HAVING A WELL-DRAFTED DURABLE POWER OF ATTORNEY
Typically a Medicaid applicant is not the person filling out the Medicaid application. It is usually another family member. That person needs to have authority to not only file the application but to attain the type of planning that may be necessary to qualify for Medicaid. A well-drafted durable power of attorney gives them that authority. Often times a Medicaid applicant either does not have a durable power of attorney in place or the one they have is insufficient. Beware of free or inexpensive internet forms. These forms frequently do not meet the Massachusetts statutory requirements and/or fail to include the necessary authority to assist with Medicaid planning. A well-drafted power of attorney should include the following powers:
- Power to make gifts – in the event it is necessary to gift to a community spouse, a disabled child or individual, transfer assets to certain types of trusts
- Power to create trusts - such as irrevocable trusts, special needs trusts
- Power to create or access bank, investment and retirement accounts – it may be necessary to access these accounts to surrender or transfer assets, or establish an annuity
- Power to apply for public benefits such as Medicaid and to communicate with such government agencies
5. NOT HAVING A WELL-DRAFTED ESTATE PLAN
In addition to a robust durable power of attorney, a well-drafted estate plan is also key. The foundation of any well-drafted estate plan is the will. Typically, married couples leave all their assets to each other. But sometimes I see wills in which a spouse has been purposefully left out of the will for fear they will need nursing home care or are already receiving Medicaid. Therefore, if the community spouse dies first the nursing home spouse will not inherit the assets and lose their Medicaid benefits. It is important to note that under Massachusetts law a spouse cannot be disinherited. They are entitled to their spousal share which is comprised of a set amount of the deceased spouse’s estate and is defined by statute. A solution to this problem is to establish a type of special needs trust inside the will (called a “testamentary trust”) for the nursing home spouse. The funds will be available to the nursing home spouse for anything they may need that is not covered by Medicaid. There is no look back period associated with this trust. Upon the death of the surviving spouse, the assets will flow to the remainder beneficiaries (usually the kids).
A common misconception is that a trust, any trust, will protect assets in the event Medicaid is needed. Not true. Only certain types of trusts qualify under the Medicaid regulations such as special needs trusts and irrevocable trusts in which the applicant does not have access to the principal of the trust and has no control over the trust assets.
6. NOT TAKING ADVANTAGE OF SPOUSAL PROTECTIONS
To avoid the community spouse becoming impoverished paying for nursing home care for their spouse, it is critical to take advantage of spousal protections available under the federal and state Medicaid laws. The home is often the most substantial asset. Transferring the home to the community spouse before applying for Medicaid will avoid a Medicaid lien and preserve the home for the community spouse. As mentioned above, the community spouse is permitted to keep up to $128,640 of the total marital assets excluding the home. In certain circumstances annuities and other planning techniques can be used to protect assets and income related to the asset above the CSRA.
7. NOT TAKING ADVANTAGE OF MEDICAID ELIGIBILITY EXCEPTIONS
The Medicaid rules are complicated and there are many traps for the unwary. Knowing how to take advantage of the exceptions such as transfers to a spouse, to a disabled child, to certain trusts, requires a keen understanding of the Medicaid maze. Consult a qualified elder law attorney to learn the proper and legal way to utilize the exceptions to your advantage.
8. NOT PLANNING FOR ESTATE RECOVERY
Medicaid has the right to recover the cost of care it provides to a Medicaid recipient, known as estate recovery. In Massachusetts, estate recovery is limited to the probate estate of the recipient. In order to avoid this, it is critical that proper steps are taken to employ some of the planning techniques referred to in this guide, such as utilizing irrevocable trust or a testamentary trust.
9. ASSUMING IT’S TOO LATE TO PLAN
Even when a spouse or loved one is in the nursing home, it may not be too late to protect the assets. Planning options such as special needs trusts, gifts to a community spouse or disabled children, and annuities may still be a viable option.
10. NOT CONSULTING WITH AN ELDER LAW ATTORNEY
Medicaid planning is a daunting task. It is complex and requires proactive planning. The Medicaid rules are constantly changing and information is quickly outdated. Don’t rely on the nursing home, well-meaning friends and family or even other attorneys who don’t practice Medicaid law for proper advice on Medicaid planning. Consult with a qualified elder law attorney who knows the Medicaid regulations and the planning techniques involved in protecting your assets.
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