We have written articles about estate planning and long-term care for more than a decade to debunk myths and misconceptions that may lead people into unnecessary problems. This article addresses some of those myths and misconceptions about Indiana Medicaid for the elderly.
Permitted Annual Gifts
People frequently tell us that they know they can give gifts each year of up to a certain value (they usually state a figure of $10,000 - $14,000). Indiana Medicaid excludes small gifts from the Medicaid transfer penalty system, but the total value of all such gifts must be $1,200 per year (that is a total of all gifts to all people as a single figure). The larger gift value ($14,000 in 2016) that most people understand has nothing to do with Medicaid, but is part of the federal gift tax law that applies mostly to people with exceeding $5.45 million. As a practical matter that annual gift value does not apply to most people with less than $5.45 million of wealth. People wanting to give or transfer money or assets to other people should always discuss their plans with an experienced elder law attorney in advance to make sure that they are not creating gift tax or Medicaid problems.
Some people think that assets owned by two or more people will not be exposed to long-term care expenses if one of the co-owners requires nursing home care. In some co-ownership cases involving real estate motor vehicles, and a few other assets, the state will not require liquidation of a Medicaid applicant's share of such assets. However, a Medicaid applicant must disclose his or her share of joint bank accounts and other co-owned accounts, and the Medicaid system assumes that the applicant owns each entire account unless the applicant can prove that other co-owners have invested some of their own money in the account.
Many people understand that a 5-year period applies to certain transactions concerning nursing homes and Medicaid. The variations of such understandings are too numerous to describe here. Medicaid's 5-year "lookback" rule provides that a nursing home resident must report any transfer of asset ownership made during the 5-year period immediately preceding the resident's Medicaid application.
Most people misunderstand Medicaid rules about married couples. Most people do not realize that if a nursing home resident has a spouse living at home, the spouse at home can keep the residence and its contents, a vehicle, and other real estate, plus 1/2 of other assets worth up to a maximum value ($121,220 in 2016). Medicaid considers all assets owned by the couple, regardless of whether the couple owns the assets together, or one person owns assets in his or her name alone. Remarried couples often misunderstand the Medicaid rules about each spouse's separately owned assets and assume falsely that Medicaid will not consider one spouse's assets in the other spouse's Medicaid application. The Medicaid rules about married people are extremely complex, so married people should speak to experienced elder law attorneys about nursing home issues when they make their estate plans and as soon as possible when health issues develop.
Medicare and Health Insurance
Four major misunderstandings exist about Medicare. First, many people are surprised that Medicare and Medicare supplemental insurance does not for nursing home care if a patient enters a nursing home directly from home. Second, Medicaid is implementing a more tolerant case-by-case standard, but most people do not realize that Medicare usually does not cover medical or nursing home expenses unless a patient is admitted as hospital inpatient through two midnights or longer (the "2-midnight rule"). Third, many people (including some nursing home officials) misunderstand that the 100-day Medicare coverage of nursing home expenses will only continue if the patient is "improving," but the true standard is if "services are needed to maintain the individual's condition, or prevent or slow their decline." Finally, many people fail to apply for Medicaid before Medicare coverage expires, creating financial crisis for nursing home residents that cannot pay nursing home expenses privately.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and Jeff is a Fellow of the American College of Trust and Estate Counsel. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator and was the 2014-15 President of the Indiana State Bar Association.
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