“What do I do if I have too many assets to qualify for Alabama Medicaid?”

“What do I do if I have too many assets to qualify for Alabama Medicaid?”

"What do I do if I have too many assets to qualify for Alabama Medicaid?"“I’ve got too many assets, what do I do? That look-back period seems like a problem and the penalty period seems like a problem. What do I do if I have too many assets?”

Properly “spend down” assets.

One thing is that there are ways to spend those assets.

Sometimes that’s called a “spend down.”

What does that mean?

That means that we can use the money, just not any gifts.

Alabama Medicaid gives us illustrations and examples of things, so we have to certainly look at those and make sure what we’re doing is right.

But in general terms, Alabama Medicaid is okay if the person going into the nursing home or their spouse is spending money as long as they’re paying a fair price for whatever they’re buying.

Let me give you an example.

Let’s say that you decide, “I want to go to Tampa, Florida, spend three days in a hotel, and I want to eat out there.”

Let’s say you book your ticket through Southwest and you’re staying at Holiday Inn.

You go out to dinner and the total cost of the trip is $1,000.

That’s fine.

That’s not a problem spending that money.

But, on the other hand, if you say, “My daughter owns a travel agency so I’m going to pay her $30,000 for that trip to Tampa.”

Well, Alabama Medicaid is going to look at that and say, “I don’t think you really paid $30,000 for this trip. I think you paid $1,000 and you gave your daughter $29,000 as a gift.”

Medicaid is not worried about you spending too much on a steak dinner or that you will go on a nice trip.

They just don’t want assets (or what they sometimes call “resources”) given away to family, to charities, to anybody.

They want you to use that money to pay for your own nursing home care or to be using that money in the economy.

That’s why around-the-world trips is okay and giving $2,000 to your grandson for graduating in college is a problem for Medicaid.

There are certain things that we can spend money on and that’s one way to reduce our assets down to a level that we qualify.

Disability exceptions for certain folks

If we have folks that are disabled, there are certain exceptions that we can transfer money or property to maybe a child or a relative.

Again, very specific exceptions but that may be a way to properly and legally give assets or transfer assets without a penalty.

Annuities can be an option

Just so we’re on the same page in annuities, let’s say you give an insurance company $100,000 and you say, “I want you to pay me $1,000 back for the next 100 months.”

You’re taking a lump sum of money, you’re taking assets, and you’re giving that to the company.

In exchange, they’re giving you fair market value, but it’s a stream of income payment.

There are all sorts of annuities.

There are very few annuities that we can use in a Medicaid context but they do exist.

That’s an option.

Certain types of trusts can hold money with Medicaid being a beneficiary

There are certain times when we can put money into a trust maybe to benefit the person who is in a nursing home.

Then when that person passes away, if there’s any money left in that trust, Medicaid can be reimbursed for what it has spent.

This is not the time to rely on the advice of your brother’s ex-second cousin in Wyoming

There are options if we have too many assets.

We just have to stay within the rules.

This maybe a little sarcastic or going over the top, but I really want to emphasize this point.

This is not the time to say, “My brother’s gardener’s ex-second cousin from Wyoming said I could do X or I could give away my house,” or “I was in the bathroom and I overheard a conversation and some guy said if you sell your house to your son for $2 instead of $1, then it’s fine with Medicaid.”

You must have good advice or you can trigger penalties

That is terrible advice and you don’t need to get your advice from an unreliable source.

You need to go to somebody who understands this law.

I hope just in showing how the look-back works and the penalty period works, we can see that doing the wrong thing could have hundreds of thousands of dollars of consequences.

For example, let’s say your father two years ago gives $270,000 to your brother.

Then a drunk driver hit your father and now he’s in a nursing home.

He had no idea he was going to need nursing home care.

He was a healthy person.

A drunk driver hits him and now this is his situation.

Your brother who he gave the money to, spent the money.

(Note the numbers change every year but this will give you the concept — right now in 2017 the number we divide the gift by is $5,800.  At the time this video was made it was $5,400)

If we apply right now, Medicaid is going to say, “There’s a 50-month penalty.”

I’m not that good at math, but I know $540,000 is 100 months, so $270,000 would be 50 months.

If the nursing home is $8,000 a month, that means the family has to come up with $400,000 (50 X $8,000).

Giving away assets without having a plan for “what if we need long-term care” is very dangerous. You want to get good advice.

You want to make sure before you do anything significant – and everything is relative, right?

We’re talking about big numbers like $500,000.

It could be $50,000 or $20,000.

If you’re giving away property or you’re transferring it for less than they full fair market value, there needs to be a strategy.

There needs to be a plan.

The plan could be “Hey, let me give away this money. I may go buy a long-term care policy for five years. That way, if something happens to me, then I won’t have to apply for Medicaid within that five-year look-back period because I’ve got the long-term care policy paying for it.”

There are all sorts of strategies.

Sometimes we use an irrevocable trust; we use insurance, we can use annuities.

But we need to make sure that we’re getting good advice and that we have a good, solid plan for what to do.

If you have any questions about Alabama Medicaid…

We’d love to hear from you.

You can reach us by phone at 1-205-879-2447.

Or you can fill out a contact form and we will get in touch with you.

Thanks for reading, and have a great day!

-John G. Watts

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