Estate Planning | Making a Difference One Family at a Time

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In this post, we will explain the Medicaid caregiver child exemption. But first, it is important to understand why this might be pertinent to you and your family’s circumstances.

Medicare Gap

At the age of 65, if you have contributed sufficiently to the Medicare program, it will become your primary health insurance. Despite its benefits, Medicare doesn’t fully cover all medical expenses, including 20% of all covered doctor’s visits and outpatient care. Planning for these costs should be a component of your retirement strategy.

The majority of individuals can handle these expenses, but a significant gap exists in Medicare coverage that isn’t easily bridged: custodial care. This type of care, which is provided in nursing homes or assisted living facilities, isn’t covered by Medicare.

To illustrate, the median cost for a year in a private room in a nursing home in Connecticut was just over $182,000 in 2021 according to Genworth Financial. Bearing such substantial costs in your later years can be challenging, and a couple may face this financial burden twice.

Understanding Medicaid Eligibility

Medicaid, a health insurance program jointly managed by federal and state governments, does cover custodial care. But, being needs-based, it has strict eligibility criteria. Your countable assets can’t exceed $1,600 in Connecticut.

The term “countable” is crucial here as certain assets, including your primary vehicle, wedding and engagement rings, heirloom jewelry, household items, and personal belongings are exempted. Additionally, you can have unlimited term life insurance, limited whole life insurance, and save up to $1,500 for final expenses.

Your home isn’t counted as a countable asset, but an equity limit applies. For 2023, the equity limit in Connecticut stands at $1.033 million, and it is subject to annual inflation indexing. There’s no asset limit if a healthy spouse resides in the home (but be cautious of estate recovery—more on that later).

Plus, when a married individual applies for Medicaid to pay for long-term care, the healthy spouse is entitled to retain certain additional property. We will delve into these details in a subsequent blog post.

Medicaid Look-Back Period

To meet the asset limit, you might consider gifting assets to loved ones, but Medicaid imposes a five-year look-back period. Gifts made within five years of your application will lead to application denial.

The ineligibility duration depends on the gifted amount as compared to the average cost of long-term care in Connecticut (assuming you live in our state).

For instance, if you gifted $340,00 within the five-year period, assuming a hypothetical $170,000-a-year average for nursing home care, you’d be ineligible for two years.

Estate Recovery and the Child Caregiver Exemption

Now that we have provided the necessary background info, we can get to the child caregiver exemption. Medicaid is required to seek recovery from the estates of deceased beneficiaries. The program can place a lien on any property that is still part of the estate.

Because of the low asset limit governing eligibility, there is usually nothing left to take. However, the dynamic is different if you apply for Medicaid when you own your own home. The home would be in play during the Medicaid estate recovery phase.

There is an exception to this rule. If one of your adult children lived with you in the home for at least two years providing a level of care that enabled you to stay out of a nursing home, you can transfer ownership to the child. Subsequently, the home would be protected from estate recovery.

Schedule a Consultation Today!

We have estate planning offices in Glastonbury and Westport, Connecticut. If you would like to set up a consultation at either location, you can send us a message to set the wheels in motion, and we can be reached by phone at 860-548-1000.

  

John McCann, Estate Planning Attorney
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