Category Archives: Medicaid

Medicaid & Mortgages


How many times have you heard the advice, “Pay off your mortgage before retirement”? Many couples are very proud of the day they finally don’t have a mortgage hanging over their head. There is much to be admired about being debt free. However, debt is not always bad. Surprisingly, when facing long term care, sometimes having a mortgage can even help!

When one spouse becomes ill and must begin receiving long term care, the healthy spouse at home may wonder how they will afford to pay for their spouse’s nursing home without losing everything. The answer for most is Medicaid. Medicaid has complicated rules that must be satisfied in order to qualify, and sometimes navigating them can seem counter intuitive. Sometimes taking out an equity loan on the house can save you thousands of dollars.

This plan only works in a very specific, but not uncommon situation. This plan may most benefit a married couple, where one spouse is ill and needs long term care, but the other spouse is staying in the family home, and the bulk of that couples’ net worth is invested in the house.


First a brief review on what happens when one spouse needs to qualify for Medicaid (see article Basics of Medicaid for more detail).

Medicaid is a means tested program, which means when determining eligibility it looks at an individual’s assets. There are two ways of classifying assets for Medicaid; exempt assets and countable assets. Exempt assets mean that Medicaid does not count them when determining eligibility. These assets are; the residential house, one car, all personal items, and prepaid funerals. All other assets are considered countable assets.

In order to see if the countable assets are low enough to qualify, Medicaid looks at the value of the assets on two different dates; the snapshot date, and the date Medicaid is applied for.

The snapshot date is the first day that the ill spouse is institutionalized for more than thirty consecutive days. If this date has not yet occurred, the snapshot date is the first date Medicaid was applied for. There is only one snapshot date. If a snapshot date has not already been established, applying for Medicaid while one is over assets, will immediately establish a snapshot date, even though the first application will get rejected. Once the snapshot date is established, then the couple can reapply in the future once assets have been spent down to a qualifying level.

On the snapshot date a “picture” is taken of the value of the countable assets. It does not matter whose name the assets are titled in. In most instances, the community spouse gets to keep half, and the rest must be spent down to $2,000 in order for the ill spouse to qualify for Medicaid. For example, if a couple has $100,000 on the snapshot date, the community spouse gets to keep $50,000 and the ill spouse must spend $48,000 to spend his side down to $2,000 to qualify for Medicaid.

There are minimum and maximum restrictions on this rule. In 2019, the community spouse is allowed to keep a minimum of $25,284 and a maximum of $126,420. This means, if the couple has only $30,000 in countable assets, the community spouse gets to keep $25,284 and the ill spouse must spend only $2,716 to get below the $2,000. However, if a couple has $300,000 in countable assets, the community spouse only gets to keep the maximum of $126,420 and the institutionalized spouse has to spend down  $171,580 to reach a qualifying level of $2,000 or less.


With a better idea of how Medicaid works for couples, we can now look at how debt comes into play. For the most part, Medicaid does not consider debt when looking at eligibility. Debts are not counted against you.

It does not matter if you have a $5,000 bank account and a $3,000 credit card bill, as far as Medicaid is concerned, you do not qualify because you have $5,000 in countable assets, which is too high. However, you are allowed to spend down your assets by paying your debts. So if you paid off your $3,000 credit card bill, leaving $2,000 in the bank, you would qualify for Medicaid. Obviously the nursing home would prefer the money be spent paying for care, which is an option, but an individual applying for Medicaid can pay off any debts he likes so long as they are his debts (cannot pay off student loans for a grandchild, for example).

This means that if a couple is looking to spend down money to qualify for Medicaid, a large loan like a mortgage can be a very quick way to spend down money to get a person qualified for Medicaid. If a person doesn’t have a mortgage, they may even want to take out an equity loan on the home to increase the amount of countable assets before the snapshot date, knowing that when the time comes to spend that money down, they will be able to repay it.


Let’s use an example to illustrate how a loan on the house can sometimes be an advantage. There are two couples that live next to each other, and have a similar financial picture.

Dwight and Angela have a house and a bank account with a net worth of $360,000. They have a house worth $300,000 and no mortgage, and have a bank account worth $60,000. Their neighbors Jim and Pam also have a house and a bank account with a net worth of $360,000. They have a house worth $300,000, but have taken out a loan with $150,000 of the equity which they did not spend, but instead added it to their $60,000 bank account. The bank account is now worth $210,000.

Both Dwight and Jim need to go into a nursing home. The wives go to apply for Medicaid for their spouses to help pay for their husbands’ care.

Dwight & Angela

The house is an exempt asset, but on the snapshot date Angela and Dwight had $60,000 in countable assets. Angela gets to keep $30,000 and they need to find a way to spend down $28,000 to get Dwight qualified for Medicaid (he gets to keep $2,000). She spends the money down on Dwight’s nursing home care for three months, and then he qualifies for Medicaid. At the end of the day, the couple has a net worth of $332,000 and Dwight is receiving Medicaid.

Jim & Pam

The house is an exempt asset, and on the snapshot date Jim and Pam had $210,000 in countable assets. Pam gets to keep $105,000 and they need to spend down $103,000 for Jim to be qualified for Medicaid (he gets to keep $2,000). They spend the whole $103,000 on repaying the equity loan they have on the house, bringing it down to just $45,000 owed on the house. Pam may also be able to apply to Medicaid to keep an extra part of Jim’s income to help with the mortgage payment.  The couple still has a net worth of $360,000 and Jim can begin receiving Medicaid immediately.

Obviously Jim & Pam are in a much better situation than Dwight & Angela at the end of the day.


This plan does not benefit single people.

This plan does not benefit married couples who already have over $250,000 in countable assets outside of the house.

This plan only works if the mortgage is taken out before the snapshot date. Once the snapshot date is established it cannot be changed. Ideally on the snapshot date, assets are as close to $253,000 as possible, though this is not always within the individual’s control.

Remember, this has to be an equity loan, not just a line of credit.

In order for the plan to work, it’s important to keep the money safe once the equity is pulled out of the house. This means, you should NOT:

  • Invest in high risk options, like the stock market. (choose something risk free)
  • Gift the money. (NEVER gift money when considering Medicaid without consulting an attorney)
  • Loan the money out.
  • Go on a spending spree. (Just because the money can be accessed does not mean it should.)
  • Tie the money up by purchasing an annuity, or a long term cd or something else you can’t access when you need it.

This is just one of many strategies that can help a couple facing long term care. Everyone’s situation is unique and therefore everyone’s estate plan is different. The laws change and are often nuanced. Consult with a specialist attorney who can help you find the right plan for you.


Medicaid for Your Spouse Issues and Traps

Medicaid for Your Spouse Issues and Traps

You pledged “for better or worse”, “for richer or poorer”, and “in sickness and in health”. What do you do now that things are worse, your spouse is so sick he needs round the clock care that you cannot provide at home and you are facing the prospect of becoming poorer and poorer?

As families seek Medicaid to help with the cost of long term care, they should be aware of some commonly overlooked obstacles.

Place your loved one in a facility that accepts Medicaid

Independent living and many assisted living facilities do not accept Medicaid especially in their “Memory Care” sections. Some facilities will accept Medicaid, but only after the patient has paid privately for some period of time.

It is especially important to know the facility accepts Medicaid in the case of married couples. The assets that the healthy spouse is able to keep are based on the total assets that the couple has on the date of institutionalization (the “Snapshot Date”). Paying for care in a non-qualified facility may reduce the amount of funds that the healthy spouse eventually gets to keep.

Title Assets Appropriately

To qualify for Medicaid, the ill spouse can have only $2,000 in countable assets. The healthy spouse (the spouse living at home) can keep much more. In addition to the “exempt” assets (the house, one car, household goods, funeral plots, and irrevocable funeral plans), the healthy spouse can keep half of the couple’s countable assets with a minimum of ($24,720 in 2018) and a maximum of ($123,600 in 2018). It is important to retitle assets properly to maintain Medicaid eligibility and to avoid Medicaid Recovery upon the death of the healthy spouse if possible.

Assume that the married couple has a home – owned jointly with right of survivorship, joint checking, savings and investment accounts as well as IRA’s and life insurance policies naming each other as beneficiaries. The healthy spouse, using a power of attorney or guardianship if necessary, should retitle the couples assets as follows:

  • Keep the joint checking account with no more than the ill spouse’s $2,000. Deposit the ill spouse’s Social Security and other income to that account.
  • Open a new account in the healthy spouse’s name alone “payable on death” to children. Have the healthy spouse’s income deposited into the new account. Transfer excess from the joint account to this new account each month to keep the joint account at $2,000 or below. Pay the household bills from the new account.
  • Title the savings account and investment accounts in the healthy spouse’s name alone “payable on death” to the children.
  • Name the children as beneficiaries on the healthy spouse’s IRA and life insurance policy.
  • Cash out or change ownership of the ill spouse’s life insurance.
  • Cash out or annuitize the ill spouse’s IRA.
  • Title any vehicles in the name of the healthy spouse alone “transfer on death” to another family member.
  • Title the house in the healthy spouse’s name alone.
  • The healthy spouse should change her will to name children as beneficiaries.

Set up a Qualifying Income Trust for High Income Individuals

Once on Medicaid, the ill spouse’s monthly income will be used for his personal spending ($50 per month), a monthly income allowance (MIA) for the spouse at home to help meet her needs and a patient liability payment to the facility. However, if the ill spouse’s gross income is above the Special Income Limit ($2,250 in 2018) he will not qualify for Medicaid regardless of his need.

High income individuals must establish a special “Qualified Income Trust” (QIT) to filter the excess income in order to qualify. This QIT must be established and funded in the month the Medicaid Application is made. If it is not, the application will be denied. This problem is compounded by the fact that a Medicaid application can take months to process. If the QIT is not in place during those months, Medicaid will not pay.

Seeking and paying for long term care for your spouse is complex and stressful. A qualified Elder Law Attorney can help you understand the process and make a plan to protect assets and secure the best care possible for your loved one.

Caretaker Child

Caretaker Child

For many seniors, owning a home is synonymous with the American Dream. The goal is to stay in the family home, and then pass it on to the next generation. The nightmare that plagues many older Americans is being forced to sell their homes to pay the expenses of long term care. For this reason, many seniors want to transfer their homes to their child or children especially if the child resides with them.

In most instances, transferring a home to a child or other family member may cause a penalty period in which Medicaid is not available to pay for care. In certain circumstances, the transfer can be considered exempt and the penalty can be avoided. One such exempt transfer is to a “Caretaker Child”.

The “Caretaker Child” is one who resides in the parent’s home providing care for at least two years prior to the parent moving into a long term care facility such as a nursing home or applying for assistance from a Home and Community Based Services (HCBS) waiver program, such as PASSPORT. Simply residing in the house is not enough. The Caretaker Child must provide needed care which otherwise would have required the parent to go to a nursing home or apply for a HCBS Medicaid program.

The Medicaid rules are quite specific as to what a Caretaker Child must do in order for the exemption to apply.

  • The Caretaker must be a natural or adopted child.
  • The child must actually reside in the parents’ home with them.
  • The parent must require help with activities of daily living or instrumental activities of daily living (See lists) to such an extent that he or she would require nursing home care if the child were not there to help
  • The child must continuously live in the home providing the care for at least two years immediately prior to the parent going into a nursing home or applying for HCBS Medicaid help.
  • The child must continue to live in the home until the transfer is made, even if the parent is placed in the nursing home or receiving HCBS Medicaid.

To prove herself, the Caretaker Child, must provide Medicaid with documentation that she meets the definition. For the transfer of the home to be exempt from penalty, Medicaid will require written proof from the parent’s doctor and the child providing care. Medicaid will scrutinize this documentation to determine if the exemption applies. It is the family’s responsibility to keep careful records as they go.

If you hope to protect the family home via a Caretaker Child exempt transfer, it is important to begin documenting your status as early as possible.

  • Be sure that you have a proper power of attorney in place in case you become too ill to sign the deed when the time comes
  • Talk to your doctor about the kind of care required and your child’s role in providing that care.
  • List the activities and actions that your child performs to keep you safe at home.
  • Your child should keep a journal or calendar of your activities, doctor’s visits, hospital stays and changes in your condition.
  • Keep a checklist of care and services provided on a regular basis.

Contemporaneous records can help you remember all your child has done and to assemble necessary proof when needed. That documentation must show the date that the child moved into the home, the parent’s condition that required the care to stay out of the nursing home, the extent and type of care that was provided, the amount of time the child devoted to the care, and other activities such as school and work, that the child was involved in during that period.

The Caretaker Child exclusion cannot be used for early planning. It is a crisis exemption as the status of Caretaker Child can only be determined at the time the parent enters the nursing home or applies for a HCBS Waiver Program. If the child moves out before the transfer is made, the exemption is lost.

There may be adverse consequences of transferring the home that should be considered.

  • The child may not qualify for certain real estate tax exemptions that the parent had
  • Transferring to the Caretaker Child may defeat the parent’s intention to divide his property equally among all of his children.
  • Transferring the house during the parent’s lifetime may create a capital gains tax problem when the child sells the house.
    • For example, if the parent purchased the house in 1950 for $30,000 and the house is now worth $230,000, the capital gain would be $200,000. A lifetime transfer gives the child the same basis ($30,000) as the parent. If the child received the house at the parents death, the child would get a “step up” in the basis to $230,000 and there would be no capital gains when the house is sold.

The laws surrounding Medicaid and the transfer of the house are complicated and constantly changing. Seek the help of a qualified elder law and estate planning attorney who can analyze your unique situation and create a plan most appropriate for you.

Activities of Daily Living (ADL)

            ADL’s are self-care activities that everyone must perform to lead a normal, independent life.

Eating: Do you have the physical ability to swallow or chew food? Do you have trouble moving food from the plate to the mouth?

Bathing & Hygiene: Can you bathe yourself and brush your own teeth?

Dressing: Are you physically able to dress yourself and make appropriate clothing decisions?

Grooming: Can you comb your hair and trim your toenails and fingernails? Can you properly apply makeup or shave yourself?

Mobility: Can you move around without the assistance of a walker, wheelchair, or cane? Can you successfully get out of bed, get onto and off of the toilet, go up and down the stairs and sit or rise from the couch or other furniture on your own?

Toileting & Continence: Are you able to use the restroom without any assistance or handle your own ostomy bag?

Instrumental Activities of Daily Living (IADL)

IADL’s are activities a person must perform in order to live independently in a community setting during the course of a normal day.

Some examples of IADL’s include:

  • Shopping
  • Cooking
  • Washing laundry
  • Housecleaning
  • Managing medications
  • Using a telephone
  • Managing money
  • Driving
  • Handling mail

Medicaid and the Family Home (REDUX)


Preserving the family home is one of the biggest concerns of Medicaid applicants and their families. In addition to being the largest single asset for most, it holds deep sentimental value and provides shelter and security to close family members.

To qualify for Medicaid in Ohio, an individual can have no more than $2,000 in countable resources. If property is owned by the Medicaid applicant, his spouse or their revocable trust, Medicaid considers it a resource. The individual’s home is excluded (not countable as a resource) so long as the individual or a recognized dependent resides there.

What classifies as a home?

A person’s home is his principal residence whether it is a house, mobile home, or houseboat. It includes all the land and buildings of the property. If multiple properties are owned, the Medicaid applicant must designate in a signed writing which one is considered “home”.

Excluding the House as a Resource

  • The Individual – The home is excluded as a resource so long as the Medicaid applicant resides there receiving services from a home Medicaid program such as PASSPORT. It continues to be excluded if there is a temporary absence such as a hospitalization or nursing home so long as the applicant submits a signed written statement of his intent to return home. It is no longer excluded if the individual moves into another residence such as an assisted living facility or a relative’s home without the intent to return home.
  • The Spouse – Even if the applicant is “institutionalized” in a nursing home or an assisted living facility, the home is excluded if the spouse resides there. In these situations, transferring the house into the spouse’s name alone may avoid future problems on the sale of the house or upon death of either spouse. It will also make it easier for the spouse to secure an equity loan or reverse mortgage if needed.
  • Dependent Relatives – The house may also be “excluded” for Medicaid purposes if other relatives who are dependent on the applicant reside there. “Relatives” can mean a child, stepchild, grandchild, parent, stepparent, grandparent, aunt, uncle, niece, nephew, brother, sister, stepbrother, stepsister, half-brother, half-sister, cousin or in-law. “Dependent” is not clearly defined. It can include financial, medical, etc. A signed written statement explaining the relationship and the reason for dependency should be submitted.
  • Co-Owners – If the property is co-owned by a person it would be excluded as a resource of the Medicaid applicant if it is the principal residence of the co-owner and he would be left homeless if forced to sell.


Transferring the Medicaid Applicant’s Interest in the Home

  • Spouse – The Medicaid Applicant may transfer his interest in the home to his spouse. This transfer is exempt (not penalized) so long as the spouse does not later transfer the house for less than fair market value. Once the house is transferred to the spouse, she may want to change her Estate Plan to exclude the Medicaid Applicant. If the home is held jointly and the healthy spouse dies first, the entire value of the house could become countable resources for the ill spouse again. Even with a change, the Medicaid Applicant may still be entitled to a portion of the estate if he survives the spouse.
  • Disabled Child – The home may be transferred to a disabled child with no penalty. It will be necessary to document the disability to Medicaid.
  • Sibling with an Equity Interest – The home may be transferred to a sibling who holds equity interest without penalty so long as the sibling has resided in the home for at least a year prior to the individual’s nursing home admission.
  • Caretaker Child – A caretaker child is one who has resided in the home and cared for the Medicaid Applicant for at least two years. A doctor must certify that without the caretaker, the individual would have required nursing home care two years earlier. Caretaker child transfers are exempt. They should be made as soon as possible and before the Medicaid Applicant’s death.
  • Penalized Transfers – If the home is given to someone whose status is not exempt less than 60 months before the Medicaid Application, the transfer may create a penalty preventing the individual from qualifying for Medicaid for some period of time. Situations must be examined individually to determine the length of the penalty, if any.

Special Situations

  • Home Equity – High value homes (with equity in excess of $500,000) may be subject to special rules. If necessary, equity may be reduced by taking a loan on the property.
  • Income Producing Property – A home that produces income for the owner, such as a duplex, apartment building or farm is also subject to special rules.
  • Medicaid Recovery – If the individual who received Medicaid passes away, any interest he holds in the home may be subject to Medicaid Recovery. If dependents reside in the home at the time of his death, Medicaid Recovery may place a lien on the home to be collected when dependents no longer reside there.
  • Sale of the Home – The appraised value on the county property tax bill will be considered the “fair market value” of the home unless other evidence in the form of a private appraisal is presented. If the home is sold to a relative or friend for less than the fair market value, Medicaid may consider it a gift. Former rules indicated that 90% of the fair market value would not be considered a gift. The present rules do not indicate how much of a discount would be allowed without being considered a gift. Once sold, the proceeds from the house are considered countable resources and, to the extent they exceed $2,000, will disqualify the individual from Medicaid.

Pooled Trusts & Medicaid Planning

Pooled Trusts & Medicaid Planning

A powerful tool for Medicaid planning that we are seeing more use from is a Pooled Trust. A Pooled Trust (sometimes referred to as a (d)(4)(C) trust) is a very specific type of trust used to help disabled individuals qualify for the government benefits they need while maintaining some funds set aside for things they may want to preserve the quality of life they are used to. A pooled trust is one of many tools an elder law attorney can use to help a person qualify for Medicaid. There are many different types of trust, and it is important to make sure you have the right trust for your situation. If used in the wrong way, a trust can actually cause more harm than good.

Basics of Medicaid

Medicaid is a needs-based governmental program to help people who cannot afford to pay for their medical care. In order to qualify for Medicaid, one must have less than $2,000 in assets. Once qualified for Medicaid, a person gets to keep $50 per month for personal spending. The rest of their income goes to pay the initial cost of the nursing home. Medicaid then picks up the tab for whatever that income does not cover that month. With the average monthly nursing home cost ranging between $7,000 – $8,000 a month, Medicaid is often the only choice for senior citizens in need of care.

Basics of Pooled Trusts

One thing all trusts have in common is that there are at least three parties to a trust; the Settlor, the Trustee, and the Beneficiary. The Settlor is the person who funds the trust. The Trustee is the person who manages the trust. The Beneficiary is the person who benefits from the trust. Often there is a primary beneficiary and then contingent beneficiaries named for after the primary has passed away.

The purpose of a Pooled Trust is to pay for items or services not provided by Medicaid. These items and services are not meant to replace SSI or Medicaid benefits but rather enhance the life of the beneficiary by supplementing them.

Pooled Trusts must be irrevocable, which means once they are set up and funded, there is no way a person can demand their money back. If they could, the trust would not qualify for Medicaid purposes.

Who can be the Settlor?

Pooled Trusts are unique in that the trust itself is already set up. An individual opts to join into an already established trust. Pooled Trusts get their name from fact that the funds in the trust are “pooled” with funds of other disabled individuals into one main trust and each individual gets their own account when they opt in. The account must be set up solely for one disabled individual’s benefit and must be funded with the individual’s assets. The person who sets up the account can be the disabled individual herself, or her power of attorney, parent, grandparent, legal guardian, or the court.

Who can be the Trustee?

The trust must be managed by a nonprofit organization. Currently in Ohio there are three companies that specialize in pooled trusts to choose from:

  • The Community Fund Management Foundation (CFMF) in Cleveland
  • The Disability Foundation in Dayton
  • The Ohio McGivney Pooled Special Needs Trust in Columbus

Separate from the trustee, who manages the funds, is the Designated Advocate, often a spouse or power of attorney, who represents the beneficiary and submits requests for money on behalf of the beneficiary.

Who can be the Beneficiary?

The primary beneficiary must be the disabled individual. “Disabled” is defined in rules adopted by ODJFS. There is currently no age limit in the state of Ohio on who can be a beneficiary. There can be no other primary beneficiaries named on the account, including the spouse or children.

Once the primary beneficiary has died, the pooled trust must contain an express provision for reimbursement to the state of Ohio for Medicaid services provided. If there are still excess funds remaining in the account once Medicaid has been paid back, those remaining funds may go to the spouse or other named remainder beneficiaries.

Funding the Pooled Trust

The trust is funded exclusively with the individual’s assets. The trust cannot receive funds from people other than the individual. A pooled trust is funded exclusively with cash. You would not put a house or personal property in a pooled trust. Assets that would otherwise be countable for Medicaid can be transferred into the pooled trust penalty free. Excess funds can later be added as they become available such as an inheritance or a lawsuit settlement. The individual can fund the trust with assets or irrevocably assign his or her income to the pooled trust. Generally there is a required minimum initial deposit of at least $5,000 to set up a pooled trust, however there is a method to fund pooled trusts with less.

Getting Money out of the Pooled Trust

Once the trust is set up and the Beneficiary is on Medicaid, the Designated Advocate represents the Beneficiary and submits forms (including receipts) to the pooled trust to request money from the trust account for the Beneficiary’s supplemental services. Once a request is approved, the Trustee releases the money from the trust account for payment to the vendor, service provider, or Designated Advocate. Cash can never be distributed directly to the Beneficiary.

Distribution requests can be submitted at any time and there is no limit on the number of distribution requests that can be submitted. The entire process may take three to four weeks from the date the request is issued. If there is an emergency, an emergency distribution request can be made at any time, but there is a fee. Reoccurring payments can be set up if the amount of the item or service remains the same, for example, a distribution request can be made for cable TV or other such common expenditure each month.

Money distributed from a trust account must be used for supplemental services for the sole benefit of the Beneficiary. The trust cannot provide for other people in the beneficiary’s life, such as for example, tuition for a child. A request may be denied if the Trustee feels it would interfere with the beneficiary’s governmental benefits, if they do not have proper documents and receipts, or if they feel the request is unreasonable.

A pooled trust can be used only to pay for supplemental services. It cannot be used for food and shelter. Supplemental services are those items or services that will not be paid for by insurance or a government program, but supplement and can enhance the quality of life of an individual with a disability. Examples include:

  • Dental Care
  • Plastic, cosmetic surgery or non-necessary medical procedures
  • Psychological support services
  • Recreation and transportation
  • Differentials in cost between housing and shelter
  • Supplemental nursing care and similar care which public assistance programs may not otherwise provide, including payments to those providing services in the home
  • Telephone and television services
  • Electric wheelchair and other mobility aids
  • Mechanical bed
  • Periodic outings and vacations, including costs incurred by caretaker companions
  • Hair and nail care
  • Stamps and writing supplies
  • More sophisticated medical, dental or diagnostic treatment, including experimental treatment, for which there are not funds otherwise available
  • Private rehabilitative training
  • Payments to bring in family and friends for visitation if the trustee deems that appropriate and reasonable
  • Private case management to assist the primary beneficiary, or to aid the trustee in the trustee’s duties
  • Medication or drugs prescribed by a physician
  • Drug and/or alcohol treatment
  • Prepay funeral and burial expenses
  • Companions for reading, driving and cultural experiences

A Pooled Trust is one of many tools that can help a person qualify for Medicaid while maintaining some funds that enhance the beneficiary’s life. It can be a powerful tool in your long term care plan. Because all types of trusts are complex, consult your attorney if you feel a Pooled Trust would be advantageous to you or someone you love.

The Split Gift & Annuity Plan (Creating and then Curing Penalties

 The Split Gift & Annuity Plan
(Creating and then Curing Penalties)

Long Term Care Medicaid is a welfare based program. This means that in order to qualify for Medicaid a person must not only have a medical need, but they must also financially qualify by having less than $2,000 in countable assets. A person, who has more than $2,000 in assets, can expect to pay privately until the money runs out and they qualify financially for Medicaid.

Many seniors are distressed by the idea of their life savings being drained to pay for final expensive days in a nursing home. They worry about how they will get by with only $50 in income once they are on Medicaid, and they wanted to leave behind an inheritance for their children. In some cases it may be possible to do emergency plans that can protect a portion of the assets from being spent down for Medicaid. We call this strategy a Split Gift & Annuity Plan.

Reducing assets to $2,000 can be accomplished by either giving away the assets or turning the assets into income for the Medicaid Applicant. The Split Gift Annuity Plan uses a combination of both techniques to shelter some of the assets while still providing payment for the applicant’s care.

Who This Plan is Good For

  • Single clients about to receive nursing home care with children, or others who they trust and want to inherit.
  • Clients who do not have other penalty free transfers available to them.
  • Clients who have already pre-purchased funerals, spent down assets, and still have assets left over.
  • Clients with at least $100,000 in assets half of which are liquid.

Making the Gift

The government does not want to encourage people who could pay for their care to give away their assets, so they penalize gifts.  Making gifts is not illegal, but is discouraged through the rules of Medicaid. Any gifts made within five years of your Medicaid application (the “look back” period) will cause a period of Medicaid ineligibility. Gifts made more than 60 months before your application need not be reported and will not be penalized. Once the gift is made, it will be penalized unless it is returned in full. A partial return of the gift will not shorten the penalty period.

Gifts made within this “look back” period will cause you to be ineligible for Medicaid for one month for every $6,327 transferred.  In other words, if you were to transfer $63,270, you would be ineligible for full Medicaid for 10 months ($63,270 divided by $6,327= 10 months).

During this penalty period when you are on Restrictive Medicaid, Medicaid does not pay for your nursing home care. This means you need to find another way to pay for your nursing home bill. However, the clock on the penalty period does not start until you are otherwise qualified for Medicaid (remember you must have less than $2,000 to qualify). With less than $2,000 in assets, there must be another way to pay for care during the penalty period without returning the gift. To accomplish this, we use a Medicaid Qualified Annuity.

Paying During the Penalty Period

During the penalty period, you will be required to come up with the funds for this nursing home bill elsewhere. Your regular income from Social Security or pensions will presumably cover part of the costs, but presumably you will still need some other way to supplement your income to afford your nursing home bill. To accomplish this, you use a portion of your assets not gifted away to purchase a Medicaid Qualified Annuity to pay for your care during the penalty period. Each month, the annuity will provide a guaranteed payment. Once the penalty period has passed, your annuity will run out and Medicaid will kick in and pay for all your care. The gifted assets will then be in your children’s hands, and Medicaid will not be able to come back for them.

Dealing with High Income

Medicaid has income limits that do not allow people to qualify for Medicaid without a special type of trust. If a person’s income is over $2,199, in order to qualify for Medicaid they will need to place their excess income in a Qualified Income Trust (QIT). Because the annuity will raise the applicant’s income over the limit, a QIT will need to be set up during the penalty period. Many people do not need the QIT after the penalty period has passed. For more information, please ask your attorney.

Possible Problems

While the Split-Gift Annuity Plan can work very well when used appropriately, there are some risks involved. There can be tax consequences. The people who receive the gift may run into issues while holding onto it. Sometimes a change in the applicant’s health or a death can interfere with the plan.

Because assets need to be liquid in order for this type of plan to work, you may be required to cash out assets. This may cause unfavorable income tax consequences. If IRA or 401K assets are liquidated, every dollar is taxable.  Withdrawing a large sum may also put you into a higher tax bracket. Accumulated income on deferred annuities and savings bonds are taxable. You may also have capital gains if you liquidate appreciated assets.  Depending on your circumstances, the cost of medical care may be deducted from your taxes.

Once the applicant gives away their assets, they lose all control over them. A gift to your children means that the funds transferred belong to them, no matter what promises they may make to hold them for you. The funds are vulnerable in the event of a child’s death, divorce, a lawsuit, bankruptcy, or the child’s decision to simply use the funds for herself. If these issues are a concern, a special type of trust can protect against some of these possibilities.

Another thing to consider is the applicant’s health. If an annuity is calculated for 10 months, but the applicant goes into the hospital for a month, they don’t need the money to cover nursing home costs during that time and will have too many assets to continue to qualify for Medicaid. Sixty-eight percent of nursing home stays last less than three months, however many last significantly longer than this. Sometimes if the applicant is in very poor health and may pass away before the penalty period would pass, it may make more sense to pay privately to avoid tax burdens and administrative costs.

It is important to remember Medicaid law is complex and dynamic. Not every plan will work for every situation. There may be better options available to you and your family. You should always consult a qualified elder law attorney before attempting any Medicaid transfer plan.

Hypothetical Example

Claire needs long term care. Her nursing home costs $7,500 a month. She has $126,540 in assets. She receives $1,250 in income each month. She has two children, Annie and Bobby. Under the supervision of her attorney, Claire splits her assets in half and gifts half ($63,270) to her two children, and uses the other half to purchase herself a Medicaid Qualified Annuity that pays her an income of $6,250 a month guaranteed for ten months.

She then applies for Medicaid, and is put on Restrictive Medicaid for ten months (due to the gift). During the penalty period she uses the annuity and her income to pay privately for her care for ten months. Because her income is high, she will need a Qualified Income Trust during this period.

At the end of the ten months the annuity is all used up. Her income drops back down to $1,250 a month and Medicaid pays for her care. The children have a bank account in their names with $63,270 in it. They use this to pay for any extra things Claire may need during her life time. When Claire dies, they divide the bank account as an inheritance.


Major Changes in Ohio’s Medicaid Laws – The 1634 Transition

Major Change in Ohio’s Medicaid Laws
The 1634 Transition

“The world hates change, yet it is the only thing that has brought progress.”
–Charles Kettering

A change to Ohio’s system of qualifying for need based public benefits is long overdue. The current system is fragmented and complex requiring needy individuals who are aged, blind or disabled to navigate a maze of different agencies, policies and procedures to qualify for SSI, Medicaid, and other programs. 

SSI Ohio Medicaid
OOD – Opportunity for Ohioans with Disabilities ODM – Ohio Department of Medicaid
Resources – $2,000 Resources – $1,500
Income – $743 Income – $634


On July 1, 2016 Ohio will streamline its Medicaid system by using the same eligibility requirements for Medicaid as are used by the Social Security Administration to determine eligibility for SSI. Only one application will be necessary and those qualified for SSI will automatically qualify for Medicaid.


Under the present Medicaid system, individuals with income higher than the qualifying level can “spenddown” their excess income on medical expenses each month in order to qualify. Spenddown can be made in a variety of ways and expenses are sometimes grouped together making individuals qualified in some months, but not in others.

Reoccurring Expenses “Pay In” Delayed
Established monthly costs or unpaid medical bills that meet spend down Pay excess assets directly to Medicaid by the 15th of the month Expenses are “incurred” in the month whether or not the person pays the bill

The “spenddown” system is inordinately complex both for the applicant and for the Medicaid worker who must review the bills and payments used to determine eligibility month by month. Depending on the type of spend down, the system is also patently unfair as some people may be forced to pay up front while others may “incur” bills that are never paid.


Effective July 1 there will be no spenddown option. Those with income more than the qualifying level will no longer be eligible for Medicaid benefits. ($733/month for community Medicaid –$2,199/month for institutional Medicaid)

The majority of Ohioans receiving Medicaid will not be affected by the change. Some who are will leave Medicaid and seek medical coverage through the exchange or through Medicare. Individuals with severe and persistent mental illness will be covered under a new state plan with an income cap of 300% of the Federal Benefit Rate ($2,199 in 2016).

“What we call progress is the exchange of one nuisance for another nuisance.”
–Havelock Ellis


In place of monthly spenddown, individuals with too high an income to qualify for Medicaid must place their excess income in a Qualified Income Trust (QIT) each month. Income properly placed in the QIT is disregarded and the individual will qualify for Medicaid.

Ohio has issued regulations regarding the qualification and operation of QIT’s and has engaged the services of Automated Health System to educate applicants and facilitate the establishment of QIT’s. These services will be provided free of charge for those already on Medicaid who will lose their benefits because of excess income when the transition occurs on July 1 (an estimated 30,000 people).

A QIT can only be used to establish Medicaid eligibility by a primary beneficiary who is eligible for LTC Services by the Ohio Medicaid Program.

  • Inpatient care in an institution such as a nursing home
  • Home and Community Based Services
  • Program for All-Inclusive Care for the Elderly (PACE) Services


The Trust itself must meet all the statutory requirements:

  • Established by primary beneficiary, his agent or guardian
  • Irrevocable
  • Primary beneficiary cannot serve as trustee
  • Medicaid payback on the death of the primary beneficiary


Trustee must establish a QIT account with a bank, credit union or other financial institution.

  • Only the primary beneficiary’s income can be placed in the QIT account
  • No other property or resources can be put into the QIT account (income received in one month and held into the next month is then considered a resource)
  • The primary beneficiary cannot assign his income directly to the QIT account, but must first receive the income then move it to the QIT in the same month
  • The primary beneficiary can put some of all of his income into the QIT, but all of the income from any one source must be put into the QIT account
  • The source of the income must be reported to Medicaid


  • Each month after the excess income is deposited into the trust account, distributions must be made as follows:
    • Personal allowances for the beneficiary
    • Maintenance allowance for the beneficiary’s spouse or dependents
    • Medical expenses incurred by the beneficiary
    • Up to $15 for bank fees, attorney fees, or other administrative costs
Income Social Security – $2,050

Pension – $1,000


$50 PSA

$1,000 MIA

$2,000 NH

Resources $1,500 Medicaid ^


Income Social Security – $2,050

Pension – $1,000





$50 PSA

1,000 MIA

$15 Bank

$1,985 NH

Resources $2,000   Medicaid ^


  • If the QIT is not established, the beneficiary cannot qualify for Medicaid
  • If the QIT document is not drafted correctly, everything in the QIT account will be considered available resources
  • If the verifying information is not provided to Medicaid every month, the income will be considered available and the beneficiary will be ineligible for Medicaid – any payments made by Medicaid during a period of ineligibility are subject to recovery
  • Any funds other than the permitted income put into the QIT account will be considered an improper transfer
  • Any distributions made from the QIT account other than those permitted will be considered an improper transfer

Some questions remain regarding the QIT process. Who will establish the QIT’s for disabled individuals who do not have an agent or guardian? Who will arrange for the transfer of their income to the QIT each month? Who will serve as Trustee for those who have no one?

“Any change, even a change for the better, is always accompanied by drawbacks and discomforts.
–Arnold Bennett