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Most senior citizens in our
community are unaware of opportunities available to them in
the event they ever need skilled nursing home care. Since care
in a skilled nursing home facility costs approximately $4,415
per month, it is important to know what opportunities are
available to help decrease this cost of care.
There are
many planning opportunities available for married couples who,
living on Social Security and interest income, do not realize
the numerous planning opportunities available to them. The
State of California, through the Medi-Cal program, will pay
the cost of skilled care for one spouse while the other spouse
lives at home.
However, the general rule is that
Medi-Cal will only pay the cost of skilled nursing care if the
healthy spouse who lives at home (hereafter referred to as the
"at-home" spouse) meets asset and income
requirements.
Medi-Cal divides assets into two
categories: exempt and non-exempt. Exempt assets are not
counted in reaching the maximum asset level. Exempt assets
include the home (of any value), IRAs in the name of the "at
home" spouse, real property "essential for self support",
property used in a trade or business, household items used to
furnish a home, all personal effects, burial insurance, plots,
trusts, vaults and crypts, all term life insurance or any life
insurance policy with a face value of $1,500 or less, musical
instruments, automobiles, reparation payments, and crime
victim payments.
Non-exempt assets such as cash,
stocks, bonds, mutual funds, money market accounts, etc., are
counted in reaching the asset limit.
The general rule
is that the maximum non-exempt assets the "at home" spouse can
retain is $90,660 for the year 2003 plus all of the exempt
assets stated above, such as the home and
IRAs.
However, this general rule is only a general
rule and it is not iron clad. This asset level is
routinely increased from $90,660 up to $400,000 if the "at
home" spouse can demonstrate that he or she needs this money
to live on. One way the "at home" spouse might demonstrate
need is illustrated in the following example.
Suppose a
husband’s monthly income is $1,260 per month from Social
Security and $400 per month from retirement benefits. The
wife’s monthly income consists of $600 per month in Social
Security. Suppose this couple has $300,000 in non-exempt
assets (CDs, cash, money market, etc.) and the wife would like
to qualify her husband for Medi-Cal benefits so that she is
not forced to pay $4,415 per month in nursing home costs. The
wife is afraid that if she is obligated to pay the nursing
home $4,415 per month for her husband’s care, and also pay her
own household bills, it will not be long before she has no
money at all.
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The federal government
anticipated this problem when it passed the Medicare
Catastrophic Coverage Act (MCCA) in 1988.
Under
MCCA, the wife can file a court petition seeking to increase
her asset level from $90,660 to $400,000 on the basis that her
monthly Social Security Income (excluding her husband’s
monthly income) is only $600 and she prefers to retain her
assets of $400,000, which, when invested at 3% (or the
current CD rate) would help bring up her monthly income to the
$2,267 maximum level. In this situation, the wife prefers to
keep all of the couple’s assets of $400,000, all of her own
social security, and a portion of her husband’s social
security up to a maximum monthly income of $2,267 and pay only
that portion of her husband’s Social Security and retirement
income which exceeds the $2,267 per month limit to the nursing
home. These petitions are routinely granted by the
courts.
Similarly, for individuals who have a large
retirement income but assets at or below the $90,660 maximum,
a court petition can be filed seeking to increase the income
level from $2,267 per month to $4,000 per month. Again, there
must be a demonstration that the excess income over and above
the $2,267 maximum limit is needed to build up their asset
level toward the $90,660 limit or that the "at home" spouse
otherwise needs this income for home repairs, medical bills,
etc.
As the population ages, it is important to
remember that all 401(k)s and IRAs in the "at home"
spouse’s name are totally exempt from counting toward the
$90,660 limit just as the family home is exempt from counting
toward the $90,660 limit The ill spouse's 401(k) and IRA is
"unavailable" and not counted initially, but exempting this
asset totally is possible but somewhat
complex.
Although planning for nursing home care for
single individuals was not discussed in this article, it
certainly exists for those seniors who are in need of skilled
nursing care. However, planning for a single person has a
whole different set of asset and income limits from those of a
married couple, and contains a different set of problems and
solutions. Two categories of assets, exempt and non-exempt
exist and planning for single persons who need skilled nursing
care is just as important as the planning for
spouses.
In conclusion, our senior population needs to
be aware that planning for future nursing home care is
extremely important if seniors wish to preserve their assets
and income in accordance with the limits allowed by law. A
certified Elderlaw Attorney is the type of attorney who can
explain and implement the planning discussed in this
article.
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Patricia Jo Wilkinson is
an attorney with Wilkinson
and Wilkinson, practicing
law in
Claremont.
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