To fully grasp the relevance of the Medicaid Caregiver Child Exemption, you have to understand an unpleasant truth about Medicare and long-term care. In this post, we will provide some background information, and we will then focus on this very useful exemption.
Medicare and Long-Term Care Expenses
You will qualify for Medicare when you are 65 if you work and pay taxes for at least 10 years, and you can qualify on your spouse’s work record if you are married. This will provide a solid health insurance underpinning, but there are out-of-pocket costs.
In addition to the premiums, deductibles, and coinsurance, there is a looming expense that Medicare does not cover at all. This program does not pay for long-term custodial care, so you have to look elsewhere for financial support.
Medicaid will cover a stay in a nursing home, and the Medicaid Home and Community-Based Services Waiver program will pay for in-home care. This is why it is relevant to seniors that will qualify for Medicare.
How Likely Is It?
Some people are not overly concerned about potential long-term care costs because they think they will never need paid living assistance. Indeed, it can be hard to imagine a time when you cannot handle all of your own responsibilities yourself or with the assistance of family members.
At the same time, it is difficult to envision what your life will be like when you are in your 80s, and this is your life expectancy once you reach your mid-60s. In fact, the Department of Health and Human Services tells us that 52 percent of seniors will need paid long-term care.
Medicaid Eligibility
Since Medicaid is a need-based program, there is a $1,600 asset limit in Connecticut, but your home is not a countable asset. There is an equity limit that is indexed for inflation annually, and at the time of this writing in 2024, it is $1.071 million in our state.
Other non-countable assets include a motor vehicle, wedding rings, engagement rings, and jewelry that has been passed down to you. Your personal belongings are not counted, and the items that you have around your house are exempt as well.
They do not count a burial plot, $1,500 saved for final expenses, and $1,500 of whole life insurance. Unlimited term life is permitted because it does not have a cash value while you are living.
Five-Year Look-Back Period
Medicaid planning would be easy if you could give your children their inheritances in advance and become eligible right away. Unfortunately, it does not work this way because there is a five-year look-back period.
If you divest yourself of assets, you will not be eligible for Medicaid for the next five years. For this reason, advance planning is the key to a successful nursing home asset protection strategy.
Granted, a lot of people need the income that they receive from the nest eggs that they have invested, so they are not in a position to give the principal away. This is understandable, but there is a solution in the form of an irrevocable, income only Medicaid trust.
You can place income-producing assets, your home, and other countable assets into the trust at least five years before you think that you may need long-term care. The principal would not be accessible to you, but you could accept distributions of the trust’s income.
The assets would not count if and when you apply for Medicaid coverage as long as the five-year look back has not been violated.
Home Ownership and the Medicaid Caregiver Child Exemption
Now that you understand the lay of the land, we can look at the exception for a caregiver child.
You may qualify for this exemption if one of your biological or adopted children has been living with you in your home for at least two years providing a level of care that has allowed you to stay out of a nursing home.
Under these circumstances, you can transfer ownership of the home to the child, and the five-year look back would not apply. Plus, there is the matter of Medicaid estate recovery.
Your home is not a countable asset, but Medicaid could place a lien on the home after your death during the Medicaid estate recovery phase. If you qualify for the caregiver exemption, it would be protected during the recovery process.
We Are Here to Help!
Our doors are open if you are ready to work with an elder care planning attorney to implement a nursing home asset protection strategy. You can call us at 860-548-1000 to schedule a consultation at our Glastonbury or Westport, CT elder law offices, and you can use our contact form if you would rather send us a message.
