Living Trust for Medicaid?

[ChrisC]

It is important to understand that Medicaid, unlike SS claiming dates, ACA qualifications and Roth conversion tables, is a government program only intended to provide a last ditch safety net for only the poorest of the poor. There are many, many people who genuinely have no or very limited assets and who desperately need the services that medicaid provides. Further, medicaid already places a significant and increasing burden on taxpayers. The tangible consequence of that burden is that lawmakers are looking to cut medicaid benefits which inevitably results in decreased quality of care for medicaid recipients.

Medicaid was never intended to provide benefits for individuals for those capable of paying for their own care. The entire purpose of the lookback is to avoid schemes, legal or otherwise, to prevent persons from transferring assets in order to place the burden of their care on the taxpayers, instead of using their own assets to pay for their own care. While medicaid eligibility rules differ from state to state, all states allow for the retention of assets, including a house, by a spouse.

Frankly, I believe the lookback period should be substantially longer that 5 years to prevent some the schemes that are being used to essentially shift the cost of care from individually who are financially capable of paying their own way to other taxpayers.

You provide a cogent rationale for why some people who could well afford to finance LTC should not be beneficiaries of Medicaid assistance. On the other hand, this rationale can be applied to numerous Government benefit programs (including tax subsidy programs) where precise lines of only capturing the most deserving, intended beneficiaries are virtually impossible to conceive or draw. For example, when unemployment was extremely high a few years ago, many unemployed used the Social Security Disability Income program in a manner not fully intended by the program. And of course, we have never means-tested Social Secruity retirement benefits so that those truly in need benefit the most. From my point of view, I don't see the difference in taking full advantage of Medicaid, Social Security programs, tax exemptions or subsidies, etc.

To me, I see hypocrisy when folks take full advantage of some government benefit program by running through various chutes and ladders and then rail against others taking full advantage of Medicaid by going through its chutes and ladders.

I think there is something more basic in the sense of indignation that some folks have when assessing the perception of unfairness that people see when others take advantage of Medicaid assistance by "sheltering assets." It's not grounded in rationale thinking, in my view, but it's more emotional like the sense that someone is gaming the system to your detriment. I can understand how it could be bothersome, but it is kinda of hypocritcial when you're also gaming or using the system to your benefit.

 

[joeea]

What I was trying to say is that 97% of nursing homes in Mass accept Medicaid patients upon entry.

If you are trying to say that 97% of nursing homes in MA will accept a new patient paying via Medicaid, I'm not so sure about that number. That is not my experience. Perhaps you can provide a link.

If instead you are saying that 97% of nursing homes will allow a patient to continue there when their payment source changes from whatever they had before to Medicaid, then I'll believe it.

 

[Mr._Graybeard]

+1 about LTC policy inhome care coverage. Paying for a MassMutual policy since age 57. Btw, there are many nursing homes that don't take Medicaid, ever, at least in my state. Private pay doesn't always equal great care, but it seriously helps. Some care quality stats can be found at nursing home.gov website that CMS populates with good data. Truly, the scariest scenario is Alzheimer's, dementia and pressure ulcer wound care. Anything else can usually be managed by skilled home care visits. Urinary incontinence is the big problem that causes the pressure ulcers, so keep those kegel exercises up people!

Of course, who wouldn't prefer to remain at home and receive assistance there. Sometimes that's not an option, though. And in most states, live-in caregivers require little to no certification or training, so finding a good one can be a crapshoot.

Ideally, a family member can help by supervising and providing some additional care when assistants are off duty. But in the case of couples, when one needs living assistance, the other may not be much better off. Kids may live some distance away.

I remember my mom telling my sister and me as her health was failing that she and Dad had talked it over and above all they didn't want to be a physical burden on their children. Dad was in good enough shape to look after Mom, but even so she spent some weeks in skilled care after discharge from hospitals. She did live her final days at home.

Some years later, Dad developed dementia and became completely dependent on me. He was quite paranoid and did not let people who were not friends or family into his house. After several months of that relationship, which was not adequate for his well-being, we finally convinced him to move into assisted living. There his physical and mental condition improved markedly. A big part of that was the social interaction with other residents. He even met a ladyfriend.

 

[pmac]

In fact, medicaid is a social welfare program, most directly comparable to other government social welfare programs like food stamps, WIC and CHIP. In some respects, it is comparable to SSDI. However, SSDI is essentially an early qualification for SS benefits. It is generally difficult to qualify for. Many SSDI applicants are denied.

SS was never intended to be means tested and SS benefits are based on what the recipient has paid into the system over time. Comparing Medicaid to SS is simply not an apples to apples comparison. Similarly, tax exemptions, subsidies and similar programs are not government welfare programs, at least as that term is generally used when describing social welfare programs.

In order to qualify for Medicaid you either have to spend down your assets or you have to deliberately impoverishing oneself by conveying assets. That is substantially different from the SS, Roth IRA, ACA subsidies, exemptions, etc, that are generally cited as justification for the Medicaid trusts used to game the system.

Medicaid trusts used to game the system may be legal, at least at the moment. But, in my opinion, people who are able to pay for their own care should do so, either directly or through the purchase of LTCI.

 

[foxcreek9]

What I was trying to say is that 97% of nursing homes in Mass accept Medicaid patients upon entry.

Almost everyone in a nursing home here is paid by Medicaid (called MassHealth) either through need or via legal "elder strategies" and, as I learned, the benefits and quality of care are identical (perhaps by law?) to the few who self pay.

Actually 61% of Mass nursing home residents are paid by Medicaid, which is slightly below the national average.

https://www.kff.org/infographic/medicaids-role-in-nursing-home-care/

 

[ChrisC]

Life Estate Deeds are big in NY. Basically gives your house title to a trust, but you have a right to reside in the home until death. At death the house title transfers to the named person in the trust. Since you don't own the house any more it is not subject to estate recovery.

You got it a bit off here. The "life estate deed" works by the owner transferring most of his interest in the home but he reserves a "life estate interest" in the home, which allows him to reside or own the house during his lifetime. But the transfer itself is subject to the 5 year lookback and afterwards the "life estate interest" is valued and counted as a resource for Medicaid purposes. Upon death of the life estate owner, complete home ownership is vested in the person who was originally transferred the extant interest, so there is nothing to recover from the prior life estate owner.

BTW, people here might be under the impression that it's easy to shelter assets or home ownernership from the 5 year lookback period -- it really isn't -- anything you transfer, with few exceptions, is captured by the lookback. 5 years appears to be a reasonable period of time to cover transfers that are patently designed to manipulate the system -- it used to be 3 years a decade ago. Going beyond 5 years for a lookback would capture a lot more transfers, but that would also capture a lot more innocent transfers, too.

And in death, unless you have a life estate in the home or there's a joint owner living in the house, Medicaid will attach a lien on the property in the estate to recover amounts that Medicaid expended for LTC for your behalf.

 

[ChrisC]

SS was never intended to be means tested and SS benefits are based on what the recipient has paid into the system over time. Comparing Medicaid to SS is simply not an apples to apples comparison. Similarly, tax exemptions, subsidies and similar programs are not government welfare programs, at least as that term is generally used when describing social welfare programs.

In order to qualify for Medicaid you either have to spend down your assets or you have to deliberately impoverishing oneself by conveying assets. That is substantially different from the SS, Roth IRA, ACA subsidies, exemptions, etc, that are generally cited as justification for the Medicaid trusts used to game the system.

Medicaid trusts used to game the system may be legal, at least at the moment. But, in my opinion, people who are able to pay for their own care should do so, either directly or through the purchase of LTCI.

I don't see the difference, sorry. We all pay into Medicaid and government assistance programs, and tax subsidies or exemptions, are no different -- they all represent a charge against the general taxpayer that don't necessarily benefit everyone. Each has its own rules for eligibility. And I think it's not entirely accurate to say that "SS benefits are based on what the recipient has paid into the system over time, " because, after all, there are many recipients like surviving spouses, divorced spouses, or dependent children who aren't paying into SS and are getting benefits beyond any reasonable return generated by the person whose earnings record benefits are based. And in Social Security, the Government tries to adjust benefits so that there's a sense that folks are not unjustly or unfairly benefitting from the system -- it's why we have WEP and GPO, and why the bend points benefit low wage earners; and why file and suspend (and the old, unlimited "do-over" rule was) eliminated.

Frankly, as said before, I don't see the difference in going thru chutes and ladders of program eligibility, whether it be Roth Conversions, ACA, 1031 rules, or Medicaid.

 

[pb4uski]

There definitely are differences even if you are unable or don't care to see them.

If you have a high career earner vs a low career earner their disability, retirement, survivor, spousal and dependent benefits will be quite different... reflecting that they made different contributions to the system... and while those benefits may not be perfectly proportional to their contributions due to bend points, etc. .... they are nonetheless significant enough to fairly say that benefits are relative to contributions. Also, there are specific payroll taxes that fund these benefits and they do not come out of general fund taxes.

No one "pays into" Medicaid or other gov't programs (SNAP, CHIP, etc) but those are supported by general fund revenues.

The big difference between ACA, Roth conversions, etc. and Medicaid LTC manipulations is the magnitude of the benefit when a year in a nursing home costs Medicaid $35k or more... any benefits from those other programs are peanuts by comparison.

At least in the case of Roth conversions, it is a tax minimization game and it is well established that one can arrange their financial affairs to minimize taxes. Nowhere does it say that it is proper to arrange you financial affairs to qualify for social program benefits.

 

[ChrisC]

Sure, there are differences in the way Government programs operate and the way they are funded, but these are differences without distinctions -- in so far as the way one navigates eligibililty, which is my point. And whether the funding source is general tax revenues from personal income taxes, payroll taxes, corporate income taxes, user fees, or industry assessments makes little difference to me once the revenue sources are part of the Federal budget with cash flow that gets allocated by our Congress.

So you think the magnitude of the purported "scamming" that people go thru for sheltering assets in Medicaid is substantially higher in financial impact than the hoops that others might go thru for other manipulations to obtain maximum benefits from ACA, Backdoor Roths or Roth Conversions for tax exemptions, 1031s, corporate income tax avoidance schemes -- perhaps you might be right, though I can't fathom that anyone has made this comparison or has suitable metrics for such, but this strikes me as immaterial to the idea that there is hypocrisy to rail against one, when taking advantage of others.

Moreover, the fact that there are rules for eligibility, whether it be Medicaid or VA benefits for LTC, that permit you to arrange your financial affairs to climb thru rungs of eligibility surely suggests that this is appropriate for one to do, from the standpoint of those who create the rules and haven't changed them.

 

[pb4uski]

....So you think the magnitude of the purported "scamming" that people go thru for sheltering assets in Medicaid is substantially higher in financial impact than the hoops that others might go thru for other manipulations to obtain maximum benefits from ACA, Backdoor Roths or Roth Conversions for tax exemptions, 1031s, corporate income tax avoidance schemes -- perhaps you might be right, though I can't fathom that anyone has made this comparison or has suitable metrics for such, but this strikes me as immaterial to the idea that there is hypocrisy to rail against one, when taking advantage of others. ...

Actually, I do... here are a few examples. I pay a little less than 10% in tax on my Roth conversions and expect to avoid 22% if I did them later.... so for an average year of $50k in Roth conversions I save about $6k. While we don't manage our income for ACA, if we did manage it to 400% FPL our subsidy benefit would be about $6k a year. To me SS timing really isn't in the same vein as the discounts and premiums compared to your FRA benefit are designed to be actuarial neutral.

OTOH, great auntie was in private pay in a nursing home many years ago and the annual costs was $70k.... so the Medicaid nursing home schemers get a $70k a year benefit... although I would concede that the cost to taxpayers is probably only a little more than half of that... but it is still at least 6x the cost to taxpayers as the other schemes.

So to me, not only are the magnitudes vastly different, but the nature of the differences (timing the recognition of income vs transferring assets beyond the reach of Medicaid) is very different too... and the combination of the two makes the Medicaid schemes much more unsavory IMO.

 

[Luck_Club]

There definitely are differences even if you are unable or don't care to see them.

If you have a high career earner vs a low career earner ... and while those benefits may not be perfectly proportional to their contributions due to bend points, etc. .... they are nonetheless significant enough to fairly say that benefits are relative to contributions. Also, there are specific payroll taxes that fund these benefits and they do not come out of general fund taxes.

Yes those bend points as you call them result in 90% pension on the first 10K in earnings, 32% pension on earnings up to $60K and a paltry 15% pension on the remaining amount up to $115K. Despite the same 12.4% confiscation of your earnings.

No one "pays into" Medicaid or other gov't programs (SNAP, CHIP, etc) but those are supported by general fund revenues.

Have you ever seen the medicare taxes confiscated from your earnings with no upper limit?

The big difference between ACA, Roth conversions, etc. and Medicaid LTC manipulations is the magnitude of the benefit when a year in a nursing home costs Medicaid $35k or more... any benefits from those other programs are peanuts by comparison.

At least in the case of Roth conversions, it is a tax minimization game and it is well established that one can arrange their financial affairs to minimize taxes. Nowhere does it say that it is proper to arrange you financial affairs to qualify for social program benefits.

You may be off a bit in this $35K number. Nursing homes I've investigated routinely charge private payers $10K+ per month. But they say they don't get as much from medicaid.

By the way your $6,000 roth conversion example results in a $360B tax dodge when applied to only 60 million of the boomer population. Which is 16 times larger than the entire medicaid expenditure of $22 billion spent on Long term support services through managed care organizations (nursing homes?)

Playing by the rules is still playing by the rules.

 

[pb4uski]

.... Have you ever seen the medicare taxes confiscated from your earnings with no upper limit?

You may be off a bit in this $35K number. Nursing homes I've investigated routinely charge private payers $10K+ per month. But they say they don't get as much from medicaid.

By the way your $6,000 roth conversion example results in a $360B tax dodge when applied to only 60 million of the boomer population. Which is 16 times larger than the entire medicaid expenditure of $22 billion spent on Long term support services through managed care organizations (nursing homes?) ...

Did you notice that I wrote Medicaid and not Medicare? Do you know the difference? If not, they are two totally different programs that unfortunately have similar names and are often confused.

The $70k private pay was almost 10 years ago and in a low cost area... the $10k/month isn't surprising... I was intentionally conservative.... your higher number would make my point even better that the magnitude of the cost of these Medicaid shenagians is much more than Roth conversions and the like.

And your Roth conversions comment is so bizarre that I'm not even going to bother to respond to it. Getting a little desparate to make an argument, eh?

 

[Huston55]

The Rules are the Rules & Your Conscience is Your Conscience

I’ve been involved in this (sometimes rather heated) discussion in previous threads. Based on that experience, I just don’t see the two sides of this argument reaching common ground; they usually don’t on this subject. And, you know, that’s OK.

But, I will say that I’ve heard a new argument on this thread which, if I understand it correctly, bears some scrutiny. That being that it’s OK to “use the rules” to take a little bit but, it’s not OK if you take a lot.

 

[pb4uski]

Well, you and others obviously don't get it. The Roth conversions, ACA, et al are just a matter of timing of things that you ultimately will do... you will ultimately take money out of that tIRA through Roth conversions, withdrawals or RMDs.... you will ultimately take SS sometime between 62 and 70... etc. If you are smart about the timing then you pay less in taxes or get more later because you deferred earlier.

The Medicaid LTC manipulation requires much more effort and planning... you have to consult with some slick lawyers, set up trusts, move and retitle assets, etc. to essentially have your neighbors pay for your nursing home care because you are too cheap to pay for it yourself even though you have the means to do so and you prefer to cheat the system so you kids can have the money.

I think it is pretty clear which is more egregious. I think it would be pretty clear to most people. Un-American too.

 

[ChrisC]

Well, you and others obviously don't get it. The Roth conversions, ACA, et al are just a matter of timing of things that you ultimately will do... you will ultimately take money out of that tIRA through Roth conversions, withdrawals or RMDs.... you will ultimately take SS sometime between 62 and 70... etc. If you are smart about the timing then you pay less in taxes or get more later because you deferred earlier.

The Medicaid LTC manipulation requires much more effort and planning... you have to consult with some slick lawyers, set up trusts, move and retitle assets, etc. to essentially have your neighbors pay for your nursing home care because you are too cheap to pay for it yourself even though you have the means to do so and you prefer to cheat the system so you kids can have the money.

I think it is pretty clear which is more egregious. I think it would be pretty clear to most people.

You repeatedly insult our intelligence by this refrain that "we don't get it," when it's obvious that we understand exactly what you're saying, but simply don't subscribe to your argument and find it hypocritical. You merely highlight differing degrees or results of the same kind of manipulation.

Whether one set of manipluation is more "egregious" based solely on financial impact misses the mark -- it's all the same to us. The rules are the rules and if you play within them, there's no reason to cast aspersions on those taking advantage of them. At some point in time, if gaming within the rules becomes objectionable to our political or governmental leadership, they will change.

 

[pb4uski]

Ok, let's have a poll and see what other members think.

http://www.early-retirement.org/for...-is-the-most-unethical-90388.html#post1999398

 

[Senator]

If I go into a LTC situation, I am going to stay at home until my assets are depleted. And I plan on having a bachelor party every night, with strippers, as long as I am able to arrange it.

Spend, spend, spend will be the order of the day until it is gone. I'll be damned if I will conserve cash just to pay a nursing home.

 

[audreyh1]

I think folks who shelter assets passing them along so they qualify for Medicaid have shot themselves in the foot, as we witnessed that poor daughter whose parents couldn’t buy into their desired CCRC because they no longer owned their assets. All of a sudden your flexibility is gone. I expect the parents were victims of some fast talking lawyer selling his services to implement this “great idea”.

Personally I want top notch long term care for DH and myself if we live that long and I hope to be able to pay for it. Heck we may be covering siblings - you never know. One reason I don’t plan on expenses going down as we age.

 

[simple girl]

For those of you who have not set up a trust, nor have purchased LTC coverage (which I have read you cannot trust to actually be there someday), how much are you setting aside for self-insuring? And what is your mechanism for doing so?

My greatest fear is I will end up in a nursing home for years, and it will bankrupt my spouse. I'd rather pass away quickly, but we all know we can't predict our future demise. My grandmother had Alzheimers and spent - oh I'm guessing 10 or 15 years - in a nursing home. That's a long time to self-insure for. I know it's not typical, but it concerns me since it happened in my family.

 

[gauss]

Right now, I'm struggling with what we want with a Trust and whether we need one at all.

I suspect most people "get sold" trusts as opposed to actually needing them. Probably not too different than those who use FAs as opposed to learning to manage their money themselves. The Atty or FAs or very well trained in selling it to incur an emotional response on your part.

I used to think I needed a Living Trust until I looked into it and nothing could be further from the truth.

-gauss

 

[gauss]

My greatest fear is I will end up in a nursing home for years, and it will bankrupt my spouse. I'd rather pass away quickly, but we all know we can't predict our future demise. My grandmother had Alzheimers and spent - oh I'm guessing 10 or 15 years - in a nursing home. That's a long time to self-insure for. I know it's not typical, but it concerns me since it happened in my family.

I believe there are some states where, under secular law, it is legal to invoke professionals to "assist" you in accomplishing your goal should you need it.

The majority of people do not have long stays in nursing homes so I view it as a low probability. If terminal, I could always legally divorce my spouse and give her at least 1/2 the assets in the divorce decree and thus not bankrupt her.

I guess I use to be afraid of this too until I researched it further.

-gauss

 

[donheff]

DW's father took a reverse mortgage to increase spending as he aged and later wanted/needed to move into a CCRC as the housing market started to collapse. His townhouse sold with just enough to make it. Six months later he would have been out of luck. It's easy to ignore the implications of your actions.

 

[athena53]

My greatest fear is I will end up in a nursing home for years, and it will bankrupt my spouse. I'd rather pass away quickly, but we all know we can't predict our future demise. My grandmother had Alzheimers and spent - oh I'm guessing 10 or 15 years - in a nursing home. That's a long time to self-insure for. I know it's not typical, but it concerns me since it happened in my family.

My trust, as I've mentioned, is Revocable and thus not a Medicaid shelter, and I never bought LTC insurance. I have enough savings and income (SS, a couple of small, non-COLA pensions) that if I threw all of my income plus 3 or 4% of my assets at nursing home costs, I could stay just about anywhere I wanted. Once you get to that stage, travel, car, home, etc, expenses and charitable donations are minimal or zero.

Now that I'm widowed, I have zero intention of marrying again as long as that means that the state might have me footing the bill for his LTC costs. I'm interested in having a good man in my life again but unless he's as financially solvent as I am, there will be no marriage.

 

[audreyh1]

For those of you who have not set up a trust, nor have purchased LTC coverage (which I have read you cannot trust to actually be there someday), how much are you setting aside for self-insuring? And what is your mechanism for doing so?

My greatest fear is I will end up in a nursing home for years, and it will bankrupt my spouse. I'd rather pass away quickly, but we all know we can't predict our future demise. My grandmother had Alzheimers and spent - oh I'm guessing 10 or 15 years - in a nursing home. That's a long time to self-insure for. I know it's not typical, but it concerns me since it happened in my family.

We don’t have anything explicitly set aside, but our retirement assets should be able to cover a long nursing home stay - at least as long as LTC will cover - and still have enough for the surviving spouse. Knock on wood!

But I agree that unless you have say an “extra” $2M - the max many LTC insurance available today will pay out, it’s tough to self-insure.

Well I guess many LTC policies payout a lot less than that. Is $400K max payout or less more typical?

If that’s the max an LTC policy will pay out anyway and you already have that amount in “extra” savings than you have the equivalent of a policy. Note that for folks with very long stays in a memory unit or expensive place will use up their policy anyway. And only one of you needs to be covered because the other will spend down the remaining assets if needed.

This doesn’t protect heirs. Some people buy LTC Insurance to protect their heirs.

 

[pb4uski]

+1 Our maxsafe spending including the value of our two homes would be almost enough to pay for nursing home care for two (though we actually spend a lot less and maxsafe is a worst case scenario) so I think that we will be fine self-insuring. I have looked into LTC insurance in the past and IMO it was a poor value proposition... it just seemed that the premiums were very high compared to the benefits and the risk.