رونوشت 🔗
WEBVTT
00:00:17.120 --> 00:00:21.760
Welcome to Financial Opportunities Uncovered, brought to you by Keeler and Adler Family Wealth.
00:00:21.920 --> 00:00:27.039
Today we're talking Medicaid planning with Maggie Sutton, a certified elder law attorney.
00:00:27.280 --> 00:00:28.079
Welcome, Maggie.
00:00:28.320 --> 00:00:28.640
Thank you.
00:00:28.719 --> 00:00:29.440
Thank you for having me.
00:00:29.679 --> 00:00:34.560
You know, I stress the term certified elder law attorney.
00:00:34.960 --> 00:00:57.200
There are probably 16,000 attorneys in Central Ohio, and some are more than happy to help you contract, you know, buy a business, look at your son's rental agreement, handle your divorce, handle your estate plan.
00:00:57.439 --> 00:01:01.520
You are a certified elder law attorney, so what is your specialty?
00:01:01.600 --> 00:01:03.600
Like what are the things that you really concentrate on?
00:01:03.840 --> 00:01:04.000
Sure.
00:01:04.239 --> 00:01:09.120
So being a certified elder law attorney, we have to have a rigorous uh background.
00:01:09.280 --> 00:01:14.159
We have to be uh well-versed in all areas of elder law.
00:01:14.480 --> 00:01:18.000
The certification comes from the National Elder Law Foundation.
00:01:18.079 --> 00:01:21.040
Um you have to pass a very rigorous exam.
00:01:21.120 --> 00:01:33.599
It's about a six-hour exam constituting both multiple choice and essays, and it covers a wide variety of topics, but all of them to some degree relate to elder law.
00:01:33.920 --> 00:01:50.079
And elder law would be estate planning, probate, estate planning, probate, uh, Medicaid eligibility or planning, special needs planning, public benefits law, a little bit of Medicare, the American with Disabilities Act.
00:01:50.159 --> 00:01:58.480
Um, so anything that could touch on older individuals, including like elder abuse, um things like that.
00:01:58.879 --> 00:01:59.280
Interesting.
00:01:59.439 --> 00:01:59.680
Okay.
00:02:00.480 --> 00:02:16.560
So, you know, one of the questions we get from clients, sometimes children of elderly clients that are maybe in a downward health health decline, is you know, should we be looking for ways to qualify for Medicaid?
00:02:16.639 --> 00:02:26.159
And again, for listeners, there's Medicare, which is part of, you know, sort of bolted onto Social Security, and that's a more or less a health insurance plan.
00:02:26.719 --> 00:02:33.199
And then there's Medicaid for people that don't have the means to pay for things in uh retirement.
00:02:34.000 --> 00:02:42.400
Um, from your experience, like what is the sweet spot for people that should be considering it or not considering it?
00:02:43.120 --> 00:02:46.400
So from my experience, I've been doing this about 15 years.
00:02:47.039 --> 00:03:03.599
We find that clients with about two to two and a half million dollars of net worth assets aren't necessarily interested in implementing strategies that would be I'll say net I'll say necessary, but that could be implemented to qualify for Medicaid.
00:03:03.919 --> 00:03:07.039
So two to two and a half million or more than assets.
00:03:07.280 --> 00:03:07.520
Correct.
00:03:07.840 --> 00:03:21.280
They're more or less like I'll self-insure, I'll you know, take the risk, and with that gives them the flexibility later on when they do need care to pick the facilities and not have limitations.
00:03:21.599 --> 00:03:33.840
So two to two and a half million and under are the folks that maybe want to consider it, and and probably the lower that number, yes, the more important it might be for them to look at it.
00:03:34.080 --> 00:03:34.240
Correct.
00:03:34.560 --> 00:03:37.520
And there are some clients that it's like it's just necessary, right?
00:03:37.680 --> 00:03:41.280
They've run out of funds and they have to qualify.
00:03:41.520 --> 00:03:50.479
Um, but we we do a lot of strategic planning to get people eligible to protect assets.
00:03:50.719 --> 00:03:53.680
And we protect them for a various for various reasons.
00:03:53.840 --> 00:04:01.280
Um, we protect them for a healthy spouse who may be younger than the individual who is needing the long-term care.
00:04:01.840 --> 00:04:06.800
We protect assets for disabled children, like disabled adult children.
00:04:07.599 --> 00:04:11.360
We protect assets for inheritance purposes.
00:04:11.520 --> 00:04:23.199
That isn't necessarily our primary reason for doing it, um, but we do have clients that that is what they want to do, and we follow all the rules, and there are ways that we're able to implement that.
00:04:23.600 --> 00:04:33.600
So, you know, there's this people that have looked into Medicaid planning or Medicaid at all understand that there's this concept of spending down assets.
00:04:33.920 --> 00:04:47.600
And if somebody has the intent to leave money to their children or grandchildren, their concern is they're they have to spend down a certain amount of their assets in order to qualify for the Medicaid to kick in and pay.
00:04:47.839 --> 00:04:55.120
So, can you talk a little bit about the difference between the income component and the asset component?
00:04:55.680 --> 00:04:58.639
It's very complicated and it's hard for me to get my head around.
00:04:59.040 --> 00:04:59.360
Sure.
00:04:59.600 --> 00:05:04.079
And it gets exponentially more complicated as you get into it.
00:05:04.319 --> 00:05:07.600
So, high level, the difference between income and assets.
00:05:07.759 --> 00:05:32.319
Income are everything like social security, um, required minimum distributions from retirement accounts, pensions, uh payments from annuities, anything that is received on a monthly basis, or something again like an RMD that somebody might receive quarterly, might take annually, but something that is a source of payment that is received on a regular basis.
00:05:32.639 --> 00:05:36.720
And all four of those that you mentioned, there's no flexibility.
00:05:37.279 --> 00:05:40.879
If you if
Load full transcript
you're getting social security, you're getting social security.
00:05:41.040 --> 00:05:44.079
If you have to take a required minimum distribution, you have to take it.
00:05:44.319 --> 00:05:46.480
Pensions, you can't generally shut them off.
00:05:46.879 --> 00:05:53.439
So that income, those four at least, components of income, you really have no ability to manipulate.
00:05:53.680 --> 00:05:53.920
Okay.
00:05:54.240 --> 00:05:54.560
Correct.
00:05:54.720 --> 00:06:04.079
And generally speaking, when it comes to Medicaid eligibility, and and I'm talking about the long-term care piece, because Medicaid program in and of itself is a large program, right?
00:06:04.240 --> 00:06:11.360
Low income, disappear disabled people, pregnant women, children, my focus is on the long-term care piece.
00:06:11.680 --> 00:06:12.800
It's for the elderly folks.
00:06:13.040 --> 00:06:13.360
Correct.
00:06:13.680 --> 00:06:18.959
And each of those programs has their own asset and or income limitation.
00:06:19.199 --> 00:06:19.439
Gotcha.
00:06:19.680 --> 00:06:25.279
So what I'm about to talk about in the terms of dollar amounts is very specific to the long-term care piece.
00:06:25.839 --> 00:06:29.920
So when it comes to income, there is an income cap.
00:06:30.639 --> 00:06:32.879
Uh, it's called the special income level.
00:06:33.040 --> 00:06:44.160
Right now it is$2,982, which sounds like a very specific number, but it is always three times the amount of the SSI maximum benefit.
00:06:44.480 --> 00:06:45.439
And that's per month.
00:06:45.600 --> 00:06:46.720
And that is per month.
00:06:47.040 --> 00:06:51.040
So right now the SSI maximum benefit is$994.
00:06:51.519 --> 00:07:01.439
So individuals who are disabled with low assets could potentially qualify for SSI and get up to$994 a month of income.
00:07:01.759 --> 00:07:09.040
Multiply that by three, you get the$29.82 as our income limit, and that is gross monthly income.
00:07:09.279 --> 00:07:15.120
If you're below that threshold, no issues being considered income eligible for Medicaid.
00:07:15.360 --> 00:07:15.680
Correct.
00:07:16.079 --> 00:07:23.839
If you're over that limit, you have to put in place what's called a qualified income trust, also known as a Miller trust.
00:07:24.240 --> 00:07:34.560
And the long and the short of how these work, it is a separate trust bank account where the individual's income it gets deposited into their current checking account.
00:07:34.800 --> 00:07:46.319
The amount of their income over the$29.82 limit has to be transferred into this bank account, this QIT bank account, and from that account it gets paid out towards their care.
00:07:46.639 --> 00:07:50.399
More or less what you're saying is anything over that, was it$29.82?
00:07:50.639 --> 00:07:51.839
$29.29.
00:07:53.040 --> 00:08:01.600
Anything over that gets deposited into the segregated account, but that has to go towards care first before they qualify.
00:08:01.920 --> 00:08:03.519
It does it every month.
00:08:03.680 --> 00:08:10.000
So when a person gets on Medicaid, Job and Family Services calculates what's called a patient liability.
00:08:10.240 --> 00:08:15.279
How much of their monthly income do they have to contribute towards their care?
00:08:15.600 --> 00:08:21.680
And then Medicaid picks up the difference between the Medicaid reimbursement rate and what their income pays.
00:08:22.000 --> 00:08:28.240
We have a lot of clients who'll come in and say, Well, I've got$6,000 a month of income between Social Security, my RMDs, and pensions.
00:08:28.560 --> 00:08:30.240
There's no way I'll qualify for Medicaid.
00:08:30.720 --> 00:08:33.440
But nursing home costs$10,000 a month.
00:08:33.519 --> 00:08:40.720
And so you've got a$4,000 monthly negative cash flow that starts dipping into your savings, and at some point the savings run out.
00:08:40.879 --> 00:08:45.919
And so you're right, and$6,000 a month doesn't cover a$10,000 nursing home bill.
00:08:46.080 --> 00:08:49.200
So those individuals can still qualify for Medicaid.
00:08:49.279 --> 00:08:49.440
Okay.
00:08:49.600 --> 00:08:51.360
They're going to have a high patient liability.
00:08:51.519 --> 00:08:54.080
Most of that$6,000 has to be paid.
00:08:54.320 --> 00:08:58.080
And the the actual Medicaid benefit might be very small.
00:08:59.039 --> 00:09:07.679
But the benefit is the Medicaid reimbursement rate is going to be something like$7,000 versus the private pay amount of$10.
00:09:08.000 --> 00:09:12.320
So they're going to contribute their six and Medicaid's going to pick up that$1,000 difference.
00:09:12.720 --> 00:09:21.440
So before we talk about the asset limitation on this income component, how does it, how does being married affect that?
00:09:22.080 --> 00:09:29.679
So when they look at eligibility, that$29.82 limit, they are only looking at the spouse that is trying to qualify.
00:09:29.840 --> 00:09:30.080
Oh.
00:09:30.320 --> 00:09:44.960
So a community, we call it a community spouse, the healthy spouse, the one not looking to qualify, they could have$20,000 a month of income, and it's not going to disrupt or disqualify the institutionalized spouse.
00:09:45.039 --> 00:09:46.720
Those are the terms that Medicaid uses.
00:09:46.879 --> 00:09:49.039
Institutionalized spouse, community spouse.
00:09:49.360 --> 00:09:50.399
So how about assets?
00:09:50.480 --> 00:09:51.120
How are those treated?
00:09:51.519 --> 00:09:51.759
Okay.
00:09:51.919 --> 00:09:53.440
So that gets even more complicated.
00:09:54.799 --> 00:10:02.080
There is a difference between an in a single individual or unmarried individual and a married spouse.
00:10:02.399 --> 00:10:08.960
A single individual, that asset limitation is$2,000 of countable assets.
00:10:09.200 --> 00:10:13.120
And I'll go into a little bit the difference between countable and exempt.
00:10:13.600 --> 00:10:24.960
In a married couple situation, the marital unit could have up to about$160,000 of countable assets.
00:10:25.279 --> 00:10:26.320
Is a house countable?
00:10:27.039 --> 00:10:27.919
So what is not?
00:10:28.480 --> 00:10:36.080
The primary residence as long as a spouse is living in it or a dependent relative.
00:10:36.320 --> 00:10:36.639
Okay.
00:10:37.039 --> 00:10:54.159
So a disabled child or just any adult child, grandchild, stepchild, cousin, parent, grandparent, nephew, uncle, any sort of relative that can also considers that their primary residence.
00:10:58.559 --> 00:11:00.639
One vehicle is exempt.
00:11:01.039 --> 00:11:09.679
And in a married couple situation, or even in a single person, it is the vehicle that has the most equity or is worth the most that they exempt.
00:11:09.840 --> 00:11:18.000
And so sometimes if a single person has two cars, if that second car is worth more than$2,000, they will never be eligible.
00:11:18.559 --> 00:11:19.360
Never be eligible.
00:11:19.679 --> 00:11:20.639
Never be eligible as long as they're not.
00:11:20.879 --> 00:11:22.000
So they meet the income.
00:11:22.240 --> 00:11:22.480
Right.
00:11:22.639 --> 00:11:24.240
But they don't meet the assets.
00:11:25.039 --> 00:11:25.840
Not eligible.
00:11:26.159 --> 00:11:26.480
Okay.
00:11:26.639 --> 00:11:26.799
Okay.
00:11:27.120 --> 00:11:30.159
And we'll talk about how you become eligible in that scenario.
00:11:30.399 --> 00:11:30.639
Yes.
00:11:30.879 --> 00:11:31.120
Okay.
00:11:31.440 --> 00:11:35.679
And then real quick, so other things that are one other big thing that's not countable.
00:11:36.000 --> 00:11:39.360
Retirement accounts in payout status.
00:11:39.600 --> 00:11:39.840
Okay.
00:11:40.000 --> 00:11:45.679
Meaning they're taking an RMD or any other regular periodic distribution.
00:11:46.000 --> 00:11:53.679
So and that's actually been a big game changer in the last five years because five years ago, retirement accounts were all considered countable.
00:11:54.000 --> 00:11:54.240
Okay.
00:11:54.960 --> 00:11:55.200
Interesting.
00:11:55.440 --> 00:11:56.159
But now they're not.
00:11:56.480 --> 00:11:57.519
That's that's a biggie.
00:11:57.759 --> 00:11:58.399
It's huge.
00:11:58.559 --> 00:12:01.360
It is huge for this population.
00:12:01.919 --> 00:12:19.039
I said a minute ago, if somebody had assets that exceeded the limit, which disqualified them even though they met the income requirement, there are strategies that you could use to maybe re-jigger the assets, move them around.
00:12:19.200 --> 00:12:21.200
But there's this thing called a five-year look back.
00:12:21.600 --> 00:12:24.240
I think it used to be three years, it's now five.
00:12:24.720 --> 00:12:28.480
So you really need to begin planning, you know, years ahead.
00:12:28.799 --> 00:12:33.840
Can you kind of get into the the look back and get it then get into the meat here?
00:12:34.000 --> 00:12:38.320
And that is, you know, how can you move things around?
00:12:38.480 --> 00:12:42.399
Um perhaps giving up some control of assets, that kind of thing.
00:12:42.720 --> 00:12:57.120
Yeah, so the five-year look back, the concept of it is at the point that a Medicaid application is filed where an individual is seeking eligibility, the county has the right to ask for the historic five years of their financial history.
00:12:57.519 --> 00:13:07.600
And what they're looking for is have the person or their spouse given away money or given away assets and not received fair market value in return?
00:13:07.840 --> 00:13:09.519
So has there been gifting?
00:13:09.679 --> 00:13:11.679
Did you put your house in your kid's name?
00:13:11.840 --> 00:13:14.000
Did you fund an irrevocable trust?
00:13:14.159 --> 00:13:16.559
Did you give your car to your grandchild?
00:13:16.720 --> 00:13:21.279
Did you give large sums of money to your children for a down payment of their house?
00:13:21.519 --> 00:13:36.480
And if you've done any of that in the five years leading up to the filing of a Medicaid application, Medicaid's gonna say, tisk tisk, you gave away money that you or assets that you could have otherwise used to pay for your care.
00:13:36.639 --> 00:13:39.360
You're now asking the government to pay for it.
00:13:39.759 --> 00:13:44.320
We see you're below our threshold, but you got there because you gave away all these assets.
00:13:44.480 --> 00:13:44.799
Okay.
00:13:45.039 --> 00:13:49.919
And then what they do at that point is they put the individual in what we call the penalty box.
00:13:50.399 --> 00:14:00.320
And they say, We are not going to pay for your care for a length of time going forward based on the value that you gifted in the prior five years.
00:14:00.639 --> 00:14:05.440
So there's sort of like recapture of the money that you gave away.
00:14:05.679 --> 00:14:05.919
Correct.
00:14:06.240 --> 00:14:11.840
They sort of credit that to what you could have been using for Medicare or Medicaid.
00:14:12.399 --> 00:14:21.679
And in theory, once that is depleted, you would then be eligible to receive Medicaid reimbursements.
00:14:22.159 --> 00:14:32.000
And just to give you a quick example, what that threshold looks like, it's about$8,600 for every$8,600 that is gifted in the preceding five years.
00:14:37.519 --> 00:14:43.360
So if they had given away$86,000 collectively, they're going to serve a 10-month period.
00:14:43.600 --> 00:14:43.919
Okay.
00:14:44.240 --> 00:14:53.279
The downside is if this is a single individual, for that 10 months to start running, they have to be below the$2,000 accountable resources.
00:14:53.919 --> 00:14:58.399
So then the question is, well, how are they going to pay for their care for the next 10 months?
00:14:58.879 --> 00:15:11.600
So they may have to try to get back some of the money that they gifted, or they can potentially apply for a hardship waiver, but there's criteria you have to meet, like you attempted to get the assets back.
00:15:11.840 --> 00:15:15.440
So we often recommend the use of an irrevocable trust.
00:15:16.399 --> 00:15:21.600
But the
clients are the the essence of that planning is they have to give up ownership and control.
00:15:22.720 --> 00:15:29.120
And that's why you know I talked at the very beginning about that two to two and a half million dollar threshold.
00:15:29.759 --> 00:15:37.840
But our experience tells us that clients with a net worth over that don't want to give up that ownership and control.
00:15:38.159 --> 00:15:38.639
Right.
00:15:39.200 --> 00:15:41.679
And there's only so many things you can put in this trust.
00:15:41.840 --> 00:15:49.279
You can't put you can put retirement accounts if you liquidate them, pay all the taxes, and transfer the proceeds.
00:15:49.600 --> 00:15:50.399
But why would you do that?
00:15:50.720 --> 00:15:51.840
Nobody wants to pay taxes.
00:15:52.080 --> 00:15:52.240
Right.
00:15:52.480 --> 00:15:52.960
Generally speaking.
00:15:53.519 --> 00:15:54.879
But if it's not included.
00:15:55.279 --> 00:15:55.679
Correct.
00:15:55.919 --> 00:15:57.039
Well, I'll get to that in a second.
00:15:57.120 --> 00:15:57.279
Okay.
00:15:57.519 --> 00:15:58.799
I'll get to that in a second because there's a difference.
00:15:59.120 --> 00:15:59.600
It's complicated.
00:15:59.840 --> 00:16:02.799
It gets way complicated, Andy, way complicated.
00:16:03.039 --> 00:16:16.080
Um, so uh you know, I had I had said to you kind of earlier before our filming started that you know you can have you could have$10 million of assets and somebody could theoretically qualify for Medicaid if they wanted to.
00:16:16.240 --> 00:16:27.759
They could put you know that$10 million into an irrevocable trust more than five years in advance, and then they need long-term care, and on paper you show you have nothing.
00:16:28.159 --> 00:16:37.840
Um, but again, clients of that caliber aren't interested in giving up the ownership and control, and there's usually a lot of income tax consequences that come with that.
00:16:38.960 --> 00:16:39.120
Right.
00:16:39.279 --> 00:16:41.679
A lot of capital gain on their investments.
00:16:41.759 --> 00:16:49.919
Um, there could be large retirement portfolios, um, and it's just not from a tax standpoint, it's just not feasible to do that.
00:16:50.399 --> 00:16:53.360
So far, we've been talking about qualifying.
00:16:53.600 --> 00:16:55.840
There's this estate recovery concept.
00:16:56.240 --> 00:16:57.120
And that's where I was going.
00:16:57.200 --> 00:16:57.360
Yeah.
00:16:57.600 --> 00:16:57.840
Yeah.
00:16:58.799 --> 00:17:08.480
So there is a difference between assets being exempt to obtain eligibility and being subject to Medicaid estate recovery when a person passes.
00:17:08.880 --> 00:17:09.200
Okay.
00:17:09.680 --> 00:17:20.559
Generally speaking, what I what we had talked about house, car, retirement, exempt for eligibility, but they all are subject to a state recovery at death.
00:17:21.680 --> 00:17:26.799
So retirement, you say, well, we don't need to liquidate it to preserve it.
00:17:27.119 --> 00:17:30.720
We don't need to liquidate it to qualify.
00:17:31.119 --> 00:17:44.240
But if we pass away with$200,000 in an IRA and the state has paid out$100,000 in long-term care benefits, the state's going to be entitled to reimbursement from the IRA of the first$100,000.
00:17:44.720 --> 00:17:46.319
And and I'll stop here real quick.
00:17:46.480 --> 00:17:53.359
In a way, the estate recovery could completely negate anything you did on the front end.
00:17:53.839 --> 00:18:10.319
And I would imagine most people that have heard water cooler talk about Medicaid planning are not considering I again, I call it recapture.
00:18:10.400 --> 00:18:14.240
Um, that's a term we use a lot in a lot of different aspects of planning.
00:18:14.400 --> 00:18:16.880
But um But that estate recovery piece.
00:18:17.119 --> 00:18:27.519
Yeah, that estate recovery piece, you know, you've qualified and you think, oh, I'm good, and I'm, you know, I'm getting my the benefits that I've paid taxes for or whatever.
00:18:27.759 --> 00:18:37.279
And then lo and behold, after somebody passes away, you know, the kids thought, oh, mom and dad did this Medicaid planning, we're safe.
00:18:37.519 --> 00:18:39.279
There's this recovery concept.
00:18:39.359 --> 00:18:44.880
That's but the recovery is only on what bomb or dad owned at death.
00:18:45.039 --> 00:18:50.000
So if we do this five-year planning, put a chunk of assets into the irrevocable trust.
00:18:50.880 --> 00:18:51.839
That is completely safe.
00:18:52.000 --> 00:18:52.160
Okay.
00:18:52.480 --> 00:18:56.720
It's what mom and dad or or whoever the Medicaid applicant is.
00:18:57.519 --> 00:19:02.160
So they so they, you know, there were certain amount of assets that they could have kept to qualify.
00:19:02.480 --> 00:19:02.720
Correct.
00:19:03.039 --> 00:19:08.400
Those assets, because they were under the limit, they didn't put in an irrevocable trust.
00:19:08.559 --> 00:19:11.440
Those are the ones subject to potentially.
00:19:11.680 --> 00:19:11.839
Okay.
00:19:12.079 --> 00:19:12.559
Potentially.
00:19:12.880 --> 00:19:22.160
With some strategic maneuvering between spouses, you can decrease what the state could actually have recovery against.
00:19:22.480 --> 00:19:24.240
Like let's just take the house, for example.
00:19:24.480 --> 00:19:29.839
Traditionally owned, jointly married couple, husband's gonna qualify for Medicaid.
00:19:30.000 --> 00:19:34.160
We will do everything in our power to get the deed to the house into the wife's name.
00:19:34.720 --> 00:19:46.240
Because if husband gets on Medicaid, so the house is exempt for eligibility, but if husband dies having an ownership in the house, his half interest is gonna be subject to a state recovery.
00:19:46.880 --> 00:19:49.440
But we can transfer his interest to the wife.
00:19:49.599 --> 00:19:56.559
She's the sole owner at his death, she never gets Medicaid during her life, the state has no claim against the house.
00:19:56.880 --> 00:19:57.440
Gotcha.
00:19:57.920 --> 00:20:01.599
And you know, as you're saying all this, something that occurred to me.
00:20:01.759 --> 00:20:18.640
There could certainly be viewers that view this as a sort of moral or ethical conundrum where somebody that's wealthy enough to pay their own way is trying to skirt the rules to, well, the rules are there for a reason.
00:20:18.960 --> 00:20:28.079
And you know, as a financial planner, clients engage us to help them uncover financial opportunities.
00:20:28.160 --> 00:20:31.519
That's the name of our podcast, financial opportunities uncovered.
00:20:31.680 --> 00:20:31.920
Sure.
00:20:32.240 --> 00:20:42.319
Um it's up to the client when we point these things out to decide whether it's the right thing for them to do morally, ethically, financially.
00:20:42.799 --> 00:20:53.440
Um so can you share kind of an example uh that you've had with clients that have kind of gone through this process and maybe what vehicles they've used to implement them?
00:20:53.759 --> 00:20:54.079
Sure.
00:20:54.400 --> 00:20:59.839
Um so one big strategy that we use is the use of a Medicaid compliant annuity.
00:20:59.920 --> 00:21:03.119
And so I'll give you a kind of a quick example with a married couple.
00:21:03.279 --> 00:21:18.720
And it most often comes up in a married couple situation because generally speaking, in these types of situations, we are trying to preserve as much assets for the community spouse, the healthier spouse, so they're not completely destitute, right?
00:21:18.880 --> 00:21:27.839
They need either income or they have their own living expenses or they may need to pay for their own long-term care, and we don't want to make them destitute.
00:21:28.079 --> 00:21:35.200
Um, so I I have an example here, just I'm gonna throw out some numbers and it'll help to kind of illustrate how this works.
00:21:35.279 --> 00:21:45.359
But so let's say we have a married couple, husband and wife, they're in their 80s, husband's health has been declining, and she decides that she needs to place him in a facility.
00:21:45.599 --> 00:21:52.640
So again, their primary residence is gonna be exempt, and we're gonna figure out ways to get the house deeded into her name as sole owner.
00:21:52.799 --> 00:21:56.559
They have two vehicles, one worth$20,000, one worth$10.
00:21:56.880 --> 00:21:59.759
So the$20,000 vehicle is going to be exempt.
00:22:00.400 --> 00:22:04.960
And then let's say they've got checking and savings accounts that have about a$40,000 balance.
00:22:05.119 --> 00:22:08.240
Now we have$50,000 of countable assets.
00:22:08.799 --> 00:22:12.400
And in their scenario, car and the checking and savings.
00:22:12.480 --> 00:22:12.880
Yep.
00:22:13.119 --> 00:22:15.440
Then they've got a CD that has$100,000.
00:22:15.599 --> 00:22:17.839
Cash in the bank, countable asset.
00:22:18.079 --> 00:22:19.599
So now we're at$150.
00:22:20.480 --> 00:22:23.680
Then they've got a brokerage account,$250,000.
00:22:24.000 -->
00:22:27.039
Wife has a Roth with$50,000 in it.
00:22:27.200 --> 00:22:33.519
Currently, that is a countable asset because she is not taking any sort of rate.
00:22:34.079 --> 00:22:38.960
So now we have$450,000 of countable assets.
00:22:39.440 --> 00:22:42.559
And they say, I want to get them qualified for Medicaid.
00:22:42.640 --> 00:22:43.519
What do we do here?
00:22:44.160 --> 00:22:46.319
So they have to spend down to that$160.
00:22:46.960 --> 00:22:50.559
So we have$290,000 that we need to spend down.
00:22:51.599 --> 00:23:01.920
She can start taking$50,$100 a month out of her Roth, and that is going to move her$50,000 from the countable to the exempt.
00:23:02.400 --> 00:23:07.119
But now we have$240,000 left to spend down.
00:23:08.000 --> 00:23:11.039
And this is where she can improve the house.
00:23:11.200 --> 00:23:16.720
So home improvements or repairs, anything into the house she wants, that's a permissible spend down.
00:23:17.119 --> 00:23:21.200
We consider her to look into irrevocable prepaid funeral plans.
00:23:21.359 --> 00:23:23.200
You know, everybody's gonna die.
00:23:23.440 --> 00:23:24.559
Might as well prepay it.
00:23:24.640 --> 00:23:26.559
We got a couple bucks we have to spend down.
00:23:26.799 --> 00:23:32.400
Medicaid says you can spend any amount of money on funeral for both husband and wife.
00:23:32.960 --> 00:23:42.720
Any other debt that they want to pay off, credit card, car loans if they had them, mortgage, any other debt they could pay off, and that's a permissible spend down.
00:23:43.039 --> 00:23:47.039
So she still has$240,000 to spend down.
00:23:47.200 --> 00:23:49.920
And she doesn't just want to spend it on care.
00:23:50.640 --> 00:23:54.079
She can purchase a Medicaid compliant annuity.
00:23:54.319 --> 00:24:06.400
She writes a check for$240,000, she sends it off to the annuity company, and then she tells the annuity company how long what the term of that annuity is.
00:24:06.640 --> 00:24:06.960
Okay.
00:24:07.279 --> 00:24:20.319
Um, there are a couple of companies nationally that will do super, super short term, like anything between two months and about three years of those annuities, and they are very specific for this type of planning.
00:24:20.640 --> 00:24:25.839
The term cannot exceed her actuarial life expectancy.
00:24:26.240 --> 00:24:26.480
Okay.
00:24:26.720 --> 00:24:31.519
So if she's 80, Social Security Administration probably says it, let's say seven years.
00:24:31.759 --> 00:24:37.279
The term of that annuity cannot be longer than seven years, but it can be anything shorter.
00:24:37.519 --> 00:24:37.759
Okay.
00:24:38.079 --> 00:24:47.920
And sometimes in these situations, the goal is for her to get as much of that money back, maybe as quickly as possible, for her to keep and be able to use for her own things.
00:24:48.319 --> 00:24:56.480
So we we have done six-month annuities, nine-month annuities, twelve-month annuities on these dollar amounts.
00:24:56.720 --> 00:25:03.839
And now she's getting a check for$10,000,$20,000,$30,000 a month from this annuity.
00:25:04.240 --> 00:25:21.680
But one of the biggest cruxes of this annuity is if she passes away before all of the annuity payments come back, the state of Ohio, to the extent of Medicaid benefits paid out on her husband's behalf, has to be the primary beneficiary on the remaining payments.
00:25:21.920 --> 00:25:32.880
You know, one of the thoughts that has often crossed my mind is you know, even if you could qualify for Medicaid, do you really want to be limited to a Medicaid facility?
00:25:33.440 --> 00:25:39.279
I understand that there are backlogs, you know, lists that you need to get on.
00:25:39.599 --> 00:25:42.240
So, you know, this strategy isn't for everyone.
00:25:42.400 --> 00:26:00.400
And it's I think as I said at the outset, it's important that that folks recognize that it's a very specialized area of law, and there are people like Maggie Sutton that can hold your hand and help you understand all the nuances and all of the gotchas, so to speak.
00:26:00.480 --> 00:26:02.079
So Maggie, thanks for joining us.
00:26:02.400 --> 00:26:03.119
Thanks for having me.
00:26:03.279 --> 00:26:05.279
And as always, we thank our viewers.
00:26:05.440 --> 00:26:14.160
If you have ideas for future episodes, feel free to reach out to us on LinkedIn or email me at andy.keeler at knwealth.com.
00:26:14.319 --> 00:26:19.039
And we'll also happily provide Maggie's contact information at the bottom of the page.
00:26:31.759 --> 00:26:38.400
The opinions expressed in this program are for general information purposes only and are not intended to provide specific advice or recommendations.
00:26:38.559 --> 00:26:43.359
It is only intended to provide education about finance, tax, retirement, and related planning topics.
00:26:43.599 --> 00:26:49.920
To determine which investment strategies are appropriate for you, consult your finance, tax, or legal advisor prior to implementing.
00:26:50.160 --> 00:26:54.079
Any past performance discussed during this program is no guarantee of future results.
00:26:54.240 --> 00:26:58.400
Any indices referenced for comparison are unmanaged and cannot be invested into directly.
00:26:58.559 --> 00:27:02.160
As always, please remember investing involves risk and possible loss of principal.
00:27:02.319 --> 00:27:04.319
Please seek advice from a licensed professional.
00:27:04.559 --> 00:27:07.519
Keeler and Adler Family Wealth is a registered investment advisor.
00:27:07.680 --> 00:27:15.920
Advisory services are only offered to clients or prospective clients where Keeler and Adler Family Wealth and its representatives are property licensed or exempt from licensure.
00:27:16.079 --> 00:27:20.640
No advice may be rendered by Keeler and Adler Family Wealth unless a client service agreement is in place.