King & Wood, P.A.

How to Pay for Hearing Aids

“More than 48 million Americans, including two in three adults over 70, live with hearing loss.”

Untreated hearing loss has been linked to a higher level of depression, cognitive decline, dementia, falls, visits to the emergency room, and hospital stays. Despite this, says an article from ncoa Adviser, “Financial Assistance for Hearing Aids: A Complete Guide for Older Adults,” fewer than 15% of adults who need hearing aids use them, and the average person takes nearly nine years to go about getting a pair after being told they have hearing loss.

Part of the reason for the delay is financial. Resources for getting hearing aids vary from state to state, and even county to county, which can be confusing. Here’s how to get started.

First, check with your health insurance company to see what’s covered and ask about additional services. You’re not just buying an appliance. Hearing aids require activation and fitting, and other unexpected out-of-pocket costs may occur. Sometimes the easiest way to verify insurance is to have a hearing aid clinic check into it.

Except in five states—Arkansas, Connecticut, Illinois, New Hampshire, and Rhode Island—insurance providers are not required to cover hearing aids as part of health care for adults. Medicare Parts A and B don’t cover the cost of hearing aids or fitting exams. Still, Medicare Part B covers hearing and balance exams ordered by a doctor and an annual audiology appointment to evaluate hearing loss. Whether or not Medicare Advantage, aka Medicare Part C, provides coverage depends upon the plan.

Medicaid coverage varies by state and plan. Many people with Medicare and Medicaid can sign up with select insurance companies and get coverage at no additional cost, but the coverage varies. Also, the quality of the hearing aids may differ.

Active duty military service members and family members diagnosed with hearing loss meeting the coverage criteria may be eligible to receive hearing aids through a TRICARE-approved provider. For veterans, the VA has hearing aid benefits. They should reach out to their local office or representative. The VA website has information on how to apply for VA hearing health care and find the nearest provider.

Federal employees of the American Federation of Government Employees (AFGE) have access to discounted hearing aids, including a free hearing exam, discounted hearing aids, and aftercare support.

Those with mild to moderate hearing loss can now consider over-the-counter hearing aids. Note that the cost of the device you are buying is a third of the price. The rest of the costs are services, so be sure what services are bundled into the offerings. Instead of relying on online reviews, research trusted sources. You’ll want to clearly understand the return policy, warranty coverage for damage and loss, and customer service.

Reference: ncoa Adviser (July 2, 2023) “Financial Assistance for Hearing Aids: A Complete Guide for Older Adults”

IRS Changes Rule on Inheritance Taxes

“The agency has curbed the tax break on a particular kind of trust that is often used to minimize capital gains taxes.”

The IRS has changed the rules regarding taxes on inheritances, curbing the tax break on a particular kind of trust often used to minimize estate taxes. According to the article “IRS quietly changes rule on how your children’s inheritance is taxed” from The Daily Mail, the agency has clarified how irrevocable trusts are taxed.

Before Revenue Ruling 2023-2, it was unclear what the tax policies were around assets passing to beneficiaries through an irrevocable trust. However, the ruling has confirmed that these trusts will now be subject to capital gains tax, significantly impacting estate planning.

Assets distributed during a person’s lifetime are typically subject to capital gains taxes on the increase in value of the asset over time. The tax is determined largely by the difference between how much the asset was worth when it was purchased and the value at the time it was transferred.

The exception to this rule has been when assets are passed to beneficiaries at the time of an individual’s death. The owner's death gives the recipients a “step-up in basis,” so they inherit the asset as if it had been purchased at the current value rather than when it was purchased. This eliminates any capital gains taxes.

Before the new ruling, transfers from irrevocable trusts generally received this tax break. The ruling now states that any property held in an irrevocable trust not included in the taxable estate at death will no longer receive a step-up basis.

This new rule must be considered to avoid substantial costs to heirs.

Let’s say a couple purchased a home in 1975 for $100,000, and the home is now worth $250,000. If they want to sell the home, the couple will owe capital gains on the $150,000 increase in value. Before the ruling, if they transferred their home into an irrevocable trust, the trust could sell the home from a cost basis of $250,000, and there would be no capital gains due if the proceeds were distributed to their children.

The ruling doesn’t mean trusts are no longer useful. However, planning needs to be more careful, with the help of an experienced estate planning attorney.

It is now critical to be sure any trust included in the taxable estate at death uses correct wording, so the value of the assets is included in the taxable estate.

Most families will not yet find themselves subject to federal estate tax, even if the value of their home is included because the current federal estate tax exemption is $12.92 per individual. However, in 2026 the estate tax limit will be lowered to about half that amount.

Seek advice from an experienced estate planning attorney to protect heirs from this important change from the IRS.

Reference: Daily Mail (July 5, 2023) “IRS quietly changes rule on how your children’s inheritance is taxed”

Should You Put Your Child’s Name on the Deed to Your House?

“If a child you’ve added to your deed goes through a divorce, has tax issues, is sued by someone, or must declare bankruptcy, your house could be on the chopping block!”

People often ask estate planning attorneys if it is possible to avoid probate after their passing simply by adding their adult children’s names to their real property deeds while they are living. As explained in the article “Think twice (and read this) before putting your kids on the deed to your home” from Coeur d’Alene/Post-Falls Press, this can theoretically work. However, it can also backfire, in a big way.

Here are the reasons to keep your property deeds in your name:

If your child has any financial problems, your home is vulnerable. Divorce, debt, litigation, or bankruptcy happen, even to the least likely children. You could lose your home. You could also end up needing to spend thousands on legal fees to convince a court that your home should not be part of the assets subject to your child’s legal or financial difficulties. Either way, you lose.

Adding your child’s name to a real property deed is a gift for tax purposes. Unless the value of your home is extremely low, which is unlikely, you’ll need to report this gift to the IRS.

If the child named on the deed passes before you, you may end up owning the home with their spouse, children, or whomever they named in their will. Did you want your daughter-in-law to be the joint owner of your home? Or your grandchildren? The outcome will depend upon the exact language used on the deed, making it vital to have an estate planning attorney draft the deed document if you use this method.

Medicaid look-back includes the transfer of any assets, including property. If you need to apply for Medicaid to help pay for long-term care, you’ll be asked if you have made any gifts or transfers of assets to anyone within the five years before submitting your Medicaid application. Adding another person’s name to a real property deed is considered a gift by Medicaid. This could prevent you from being eligible for Medicaid assistance for months or as many as five years.

Co-owners must agree on decisions about the property. Your co-owner has to agree before you can sell your home, rent it, or take out a loan against the home’s value. Can you be sure that your child or other co-owner will agree to your wishes?

Capital gains taxes as co-owners are different from inherited property. If a child inherits a property after death and then sells it, they will only be responsible for paying capital gains taxes assessed on any increase in value from the date of your death to when the property is sold. However, if their name is on the property deed while you are living, they will be deemed to have acquired their one-half ownership for half the price you originally paid. They will be responsible for the capital gains taxes applied to their half. They’ll have a hefty tax bill, which they would not have had if they inherited the home.

There are ways to plan for your estate to minimize probate without adding a child to your property deed. All of this can be done in a way that doesn’t put your property at risk if you or your child runs into financial trouble and protects your eligibility for Medicaid. An experienced estate planning attorney can help create an estate plan to protect you, your home and your heirs.

Reference: Coeur d’Alene/Post Falls Press (June 11, 2023) “Think twice (and read this) before putting your kids on the deed to your home”

Planning for Long-Term Care and Taxes

“Many families discover that trying to mitigate the cost of long-term care can conflict with another common retirement concern—reducing taxes for retirees and their heirs.”

Retirement brings about several risks including longevity, market risk and inflation, paired with two of the most common concerns of later life: the costs of long-term care and how to reduce or avoid taxes during retirement and upon transferring assets to heirs. These concerns are addressed in a recent article from Kiplinger, “Long-Term Care Planning vs. Taxes: Finding a Healthy Balance.”

Long-term Care Insurance (LTC) is recommended for individuals and families under age 65 with investable assets ranging from $1.5 million to $3 million. The limits on net worth and age are based on striking a balance between the coverage cost and what benefits would be received. The initial goal of LTC insurance to finance the cost of assisted living and skilled medical care has now become more of a hedge against the final bill for LTC than total coverage of expenses.

With the chance of needing to live in an elder care facility and the average stay of three or more years, plus the cost of skilled care, this is now a major reason for people declaring bankruptcy during retirement. LTC insurance was sold as protection, but as life expectancies with medical conditions have increased, so has the cost of care. As a result, premiums have skyrocketed, and benefits have been reduced.

Universal Life Insurance with Accelerated Benefit Riders is an option better suited for people up to age 70 with $3 million to $5 million in investable assets. The premiums are high, but the policies act as a multi-use tool, providing coverage and the opportunity for wealth leveraging for the next generation.

Accelerated Benefit Riders (ABRs) are a special kind of life insurance rider triggered by medical conditions allowing the death benefit of the policy to be advanced to the owner during their lifetime, often up to 100% of the policy’s face value, for funding an extended stay in an assisted living or skilled care facility.

Asset Protection Trust Planning is the focus for most Americans with a net worth of less than $2 million. This is where the pressure of the costs for skilled nursing care is felt more intensely. Those with fewer assets have more to lose and need protection more than the wealthy.

Self-settled wholly discretionary grantor trusts, which are irrevocable, are used to house certain assets Medicaid would expect families to liquidate or spend before approving benefits to cover the bulk of the cost. Certain provisions of irrevocable trusts can be changed depending on the state of residence, such as who the trustee is and who the beneficiaries are.

The trustee should not be one of the grantors of the trust, and there is a five-year look-back on the trust’s funding. For example, if a grantor needs long-term care five years after assets were moved into the trust’s name, other assets will be needed to pay for the care.

Families are encouraged to plan early—ideally, just before or in the early years of retirement. The needs of the family drive which assets are placed in the trust. However, not everything goes. For instance, placing IRAs or other qualified accounts into an irrevocable trust would be unwise because this would be a fully taxable event. Roth IRAs may be placed in a trust. However, then they would lose their Roth status.

Careful planning with an experienced estate planning attorney can establish a balance between maximizing protection and minimizing taxes.

Reference: Kiplinger (March 20, 2023) “Long-Term Care Planning vs. Taxes: Finding a Healthy Balance”

Estate Planning Mistakes to Avoid

“It is a common misconception that only the ‘uber rich’ need an estate plan, when in actuality, everyone should have a plan.”

If you fail to create an estate plan, your state’s laws will determine who will inherit your assets and if you have minor children, the court will appoint a guardian to raise your children. The state's laws may not be what you had in mind for your legacy. However, this happens if you fail to have an estate plan, as described in the article “AVOID THESE (estate planning) MISTAKES!” from Westchester & Fairfield County Business Journals.

Failing to have a plan or review your estate plan regularly. Failing to have a plan is the most common mistake Americans make. Unfortunately, less than half of all U.S. adults have estate planning documents in place, and only 36 percent of parents with minor children have end-of-life plans. You may feel estate planning is optional. However, everyone over 18 should have a plan.

It doesn’t have to be complicated. However, a simple will prepared by an experienced estate planning attorney indicating who should receive your assets upon death and advance directives indicating who will handle medical (health care proxy) decisions and financial power of attorney decisions in case of incapacity is a good start. Once your plan is in place, reviewing it every three to five years is a good idea.

Thinking that a trust will make things too complicated or neglecting to fund a trust. Revocable and/or irrevocable trusts are excellent ways to avoid probate, the surrogate court’s process to validate a will and executor and specify how funds will be distributed to beneficiaries. Using a revocable trust and properly funding can eliminate the need for some or all of your estate to pass through probate, depending on how the trust is structured.

Relying too heavily on beneficiary designations. Far too many people think they can avoid having an estate plan by depending on beneficiary designations on all assets. For example, let’s say you have an investment account in your name alone, with your spouse and children as beneficiaries. From a tax planning perspective, you may lose tax planning opportunities if funds are passed directly to a beneficiary spouse. If a beneficiary is a minor and receives the assets, the court must appoint a guardian. Those funds would then be held in control of the court until the minor beneficiary reaches the age of majority. A trust for a minor child is one way to solve this problem.

If a named beneficiary dies before you without a secondary or surviving beneficiary, the account will become part of the probate estate. If you have received Medicaid benefits, whether home care or nursing home care, the asset will be subject to any claims made by Medicaid or creditors.

Using online templates and forms. Estate planning attorneys devote a fair amount of time to fixing the mistakes made by people downloading online forms. They may be inexpensive initially. However, mistakes and/or omissions can’t be corrected if an individual becomes incapacitated or deceased. In addition, when the forms don’t comply with state-specific laws, they may become invalid.

Keeping estate plans and wishes a secret. If family members or trusted friends don’t know you have an estate plan or don’t know where documents are located, it makes their tasks very difficult. The person you name as your health care power of attorney, for instance, needs to know where all of your advance directives are located and be able to access them in the event you become incapacitated. Similarly, your executor needs to know where wills and trust documents can be found. Equally important is discussing your wishes for burial, funeral and other arrangements.

Having a plan for incapacity and death is a gift to those you love, ensuring they know what to do, sparing them from a frantic search for time-sensitive documents and alleviating them from guessing what you would have wanted.

Reference: Westchester & Fairfield County Business Journals (March 16, 2023) “AVOID THESE (estate planning) MISTAKES!”

Top 10 Estate Planning Myths

“Everyone needs to worry about estate planning. That planning doesn’t only pertain to what happens when you die but what could happen if you end up incapacitated.”

Estate planning addresses many issues, from who inherits your property or handles your finances to who takes care of you if you’re incapacitated to who manages funds for a disabled child. Unfortunately, there are many myths around estate planning, as explained in the recent article “Debunking the Top 10 estate planning myths” from Insurance News Net.

Only wealthy people need estate planning. This is easily the biggest myth of estate planning. Estate planning addresses planning for incapacity and taking care of your legal and financial affairs if you can’t. It also includes planning for end-of-life care and delineating what medical procedures you want and don’t want. Estate planning also creates a plan for families with minor children, if something should happen to parents.

Having a will means avoiding probate. Probate is the court process where the court reviews your will, establishes its validity and allows your executor to administer the estate. If your goal is minimizing or avoiding probate, talk with an estate planning attorney about retitling assets and creating trusts.

You need a trust to avoid probate. A trust is only one way to avoid probate. You could consider titling assets as joint tenants with rights of survivorship, although there are risks involved in doing so. Depending on your state of residence, you might also consider various transfer-on-death arrangements. Assets with beneficiary designations, like IRAs, 401(k)s, annuities, and other financial accounts, pass directly to beneficiaries.  You might also give away assets while you are living.

Putting a house in joint and survivorship ownership with an adult child will avoid probate. You may avoid probate. However, you create tremendous risk with this move. If your adult child becomes a half-owner, you’ll need their okay—and their spouse’s approval, too—to sell the house. You won’t qualify for the tax-free sale of your personal residence on half of the sale proceeds, unless your child also qualifies. If your child has financial problems or undergoes a divorce, their half ownership could be attached by creditors or be owned by an ex-spouse.

My will says who will inherit my IRA. The beneficiary designation on IRAs, life insurance and retirement accounts, and any account with a beneficiary designation overrides whatever your will says. The will does not control annuities, payable on death accounts, or transfer on death accounts and affidavits. You should check these forms periodically to ensure that the funds go where you want them to go.

I don’t need a will if my beneficiary forms are correct. However, you still need a will. For example, if a child dies before you, what happens to the assets if they were the beneficiaries? What happens to assets if a beneficiary is not of legal age and cannot inherit the money directly? Who makes decisions if there are multiple children and real estate decisions that need to be made? What if an adult child has a debt problem? Who will pay your final expenses? These are just a few issues that are addressed by wills.

A revocable trust will protect assets if I enter a nursing home. Totally wrong. Medicaid planning usually involves an Irrevocable Trust to protect assets. Revocable trusts will not make you eligible for nursing home care.

Trusts avoid probate. Assets in a trust don’t go through probate. However, it is only if the trust is funded. Assets must be immediately placed in the trust, usually through re-titling, or postmortem through beneficiary designations. Otherwise, the assets go through probate.

If my will says, “per stirpes,” my grandchildren will inherit assets if my adult children die first. This oversimplification of a complex issue is typical of estate planning myths. Grandchildren only inherit assets if the adult children die before the grandparent. If you want your grandchildren to inherit assets, you need a “bloodline” trust. An estate planning attorney will help you accomplish this.

I only need a will and a trust for my estate plan. This is another big mistake. An estate plan includes documents for incapacity and end-of-life, including Power of Attorney, Health Care Power of Attorney, Advanced Directives and a Living Will Declaration.

Reference: Insurance News Net (March 15, 2023) “Debunking the Top 10 estate planning myths”

Can I Protect My Elderly Parents?

“As the American population of seniors continues to expand, the need for intentional estate planning becomes more urgent, especially for the children of aging parents.”

Estate planning requires the ability to be realistic about current health and assets, while considering the inevitable changes to come. For adults with aging parents, having a well-thought out estate plan, regardless of the size of the estate, becomes more urgent as the time to use the documents draws closer. A recent article, “Accessing needs of aging parents,” from The News-Enterprise explains the steps adult children need to take to protect their parents.

There are four key factors to consider: medical needs, housing and care needs, finances and legal needs. All require candid, non-emotional assessments.

Start with medical, housing and care needs. Consider the next five years. Is it likely their medical condition may decline? How will their present home work, if they are unable to manage steps or need to sleep and toilet on the same level? If their home is not conducive for aging in place, will they consider moving to a better situation—or can they afford to make any changes?

Next, examine health and care needs. Do they have long-term care insurance or do they expect to apply for Medicaid? If one spouse will need memory care or one spouse dies, will the surviving spouse have the resources needed to remain in home and receive the care they need? An experienced estate planning attorney will be able to evaluate their financial situation with regard to becoming eligible for Medicaid, if this will be needed. There is a five-year look-back period for Medicaid, so advance action is necessary to protect assets.

Do they have any estate planning documents in place? Is there a will, and when was it prepared? Ask any estate planning attorney how many times seniors have told their children a will exists, only for the children to learn the will is forty years old, woefully out of date and declared invalid by the probate court. Deceased individuals may be listed as agents for Power of Attorney and Medical Power of Attorney. Funds left for heirs may no longer exist. Laws for power of attorney may not include required provisions as a result of changes to the law.

More complicated issues may exist. If appreciated real estate property has been deeded to loved ones to protect the property from nursing home costs, are the beneficiaries prepared to pay the resulting taxes? If deeded real estate property was intentionally left unrecorded, transferring property could become a legal quagmire.

The best solution is to have an experienced estate planning attorney meet with the parents, review any existing documents and prepare an updated set of documents to achieve the parent’s goals, protect them in case of medical emergencies and allow parents and children to gain the peace of mind of knowing they are ready for the future. This includes a will, power of attorney, health care power of attorney, HIPAA release, living will and, depending upon the situation, may also include trusts.

Reference: The Times-Enterprise (Nov. 5, 2022) “Accessing needs of aging parents”

How Do Special Needs Trusts Work?

“A special needs trust (SNT) can help you provide financial security to your child after you die without leaving them ineligible for the government benefits that they need to sustain care.”

Parents with children who have special needs know they play a pivotal role in their child’s medical, social, emotional and mental health. They also face the challenges of figuring out government assistance programs like Medicaid and how these and other programs provide much-needed help throughout a child’s life. Another important way that parents of children with special needs help is with the creation of a special needs trust, as explained in the article “Special Needs Trust (SNT): What It Is and How It Works” from Forbes.

A special needs trust is used to hold assets in an account to be used to support an individual with special needs. The funds belong to the trust and not the individual, so they are not factored into their eligibility for government benefits.

SNTs are typically set up by a parent, grandparent, or guardian. The person who sets up the account, called the “grantor,” funds the account, as may any other individuals who wish to provide for the child.

The grantor names a trustee, or a third party, who administers the trust. The trustee is a fiduciary and must act in the best interest of the beneficiary. Funds are to be distributed in accordance with the directions in the trust. The trustee will be responsible for distributing funds, following government benefit rules and requirements, and managing tax obligations, among other things.

Parents are often the trustees, although others, like siblings or close relatives, may also be trustees. Parents who are both grantor and trustee generally name a successor trustee to take over after they die, become incapacitated or resign from their role.

A person who may not be able to support themselves due to a medical condition or a disability can gain financial security from an SNT.

Someone with special needs is likely to rely on means-tested government benefits, like Supplemental Security Income (SSI) or Medicaid. These benefits are only available to people with limited income or assets. Anyone receiving SSI, for example, may not have more than $2,000 of countable resources.

A parent who wishes to provide support after they die must plan in advance, so their bequest does not result in the person losing their benefits. This could happen if money is left through anything except a special needs trust. An estate planning attorney will know how to structure the parent’s estate plan to protect the individual with special needs and their government benefits.

Assets in an SNT can be used for a wide variety of expenses, including out-of-pocket medical or dental expenses, personal care givers, rehab services, education, vacations, and other permissible uses.

There is a lot of complexity involved with creating a special needs trust. For one, there are several different kinds of SNTs. You’ll want to select the one best suited for your family. Laws about means-tested benefits vary across states, so you’ll need to work with an estate planning attorney familiar with the laws of your state.

A well-drafted estate plan, incorporating a special needs trust, will provide your loved one with the resources to maintain as much normalcy as possible as they adjust to life without their parents.

Reference: Forbes (Sep. 22, 2022) “Special Needs Trust (SNT): What It Is and How It Works”

How Do You Provide Financial Help for a Special Needs Child and Retirement Too?,

“People with children who cannot support themselves need to think well past their own lifetime and figure out how to provide for children after they are gone.”

For parents of children with disabilities, the challenges of preparing for retirement and for their child’s future are far higher than for families with healthy, high-functioning adults. Planning for your own retirement, while needing to secure the stability and basic needs of a child who will be a dependent forever often feels impossible, according to the recent article “Planning for Your Retirement, and for a Child’s Special Needs, All at Once” from The New York Times.

Even under the best of circumstances, where there’s plenty of money available and many hands to help, caring for an adult child with special needs is emotionally and physically challenging. As parents age, they have to address their own needs plus the needs of their adult dependent. Who will care for them, provide safe and comfortable housing and care for them when their parents no longer can?

Understanding the entire picture can be difficult, even for parents with the best of intentions. First, they need to understand how their retirement planning must be different than other families. Their investments need to be multi-generational to last not just for their lifetimes, but for their child’s lifetime. They can’t be too conservative because they need long-term growth.

In addition, special needs parents need to keep a certain amount of funds liquid and easily accessible, for times when their child needs a new piece of expensive equipment immediately.

One of the parents will often leave the workforce to provide care or take a lower paying position to be more available for care. This creates a double hit; the household budget is reduced at the same time its strained by costs not covered by benefits or insurance. Paying for gas to drive to therapy appointments and day program, buying supplies not covered by insurance, like adult diapers, waterproof bedding, compression garments to promote circulation, specialized diets, etc. adds up quickly.

Even with public health assistance, finding affordable housing is not easy. One adult may need supervised care in a group home, while others may need in-home care. However, the family home may need to be modified to accommodate their physical disabilities. With wait times lasting several years, many families feel they have no choice but to keep their family member at home.

Another challenge: if the parents wanted to downsize to a smaller house or move to a state where housing costs are lower, they may not be able to do so. Most of the public benefits available to special needs people are administered through Medicaid at the state level. Moving to a state with a lower cost of housing may also mean losing access to the disabled individuals’ benefits or being placed at the end of the waiting list for services in a new state.

For disabled individuals, maintaining eligibility is a key issue. Family members who name a disabled in dividual as a beneficiary don’t understand how they are jeopardizing their ability to access public benefits. Any money intended for a disabled person must be held in a specialized financial instrument, such as a special needs trust.

The money in a special needs trust (SNT) may be used for quality-of-life enhancements like a cellphone, computer, better food, care providers, rent and utilities among other qualified expenses.

There are two main categories of SNTs: first party trusts, created with assets belonging to the individual. Any money in this trust must go to reimburse the state for the cost of their care. Another is a third-party special needs trust, established and funded by someone else for the benefit of the disabled individual. These are typically funded by parent’s life insurance proceeds and second-to-die life insurance policies. Both parents are covered under it, and the policy pays out after the second spouse dies, providing a more affordable option than insuring both parents separately.

Reference: The New York Times (Aug. 27, 2022) “Planning for Your Retirement, and for a Child’s Special Needs, All at Once”

How Much Money Can a Well Spouse Keep If Medicaid is Needed?

“The intent of the laws and regulations is to allow the community spouse to have enough income and assets, so that he or she has enough income and assets to continue to live at home, whether that be a home, an apartment, or other living place.”

Despite the intent of the law, allowing one spouse to remain in the family home and having enough income to live on when the other spouse needs Medicaid to pay for nursing home care does not happen automatically. According to the article “What a ‘Community’ spouse can keep” from The Bristol Press, protecting the community spouse is necessary if they are to maintain their prior standard of living.

The community spouse is entitled to have a minimum monthly maintenance needs allowance (MMNA), which changes every year. If the MMNA is $2,288.00, and the healthy spouse has an income of $1,000.00, Medicaid allows a diversion of the sick spouse’s income of the difference, or $1,288.00 per month to the healthy spouse. In most situations, this is not enough to maintain a home, pay bills and enjoy a well-deserved retirement.

An elder law lawyer can help protect assets for the community spouse. The family home is exempt, if it is in the name of the healthy spouse, although most states have a limit to the allowed value. If the sick spouse is approved for Medicaid, the healthy spouse may choose to sell the home and keep the proceeds or downsize to a smaller home.

The community spouse may keep up to $137,400.00 in investment assets in 2022. That’s considered one half of the couple’s total “countable” assets. If the couple’s investment exceeds this amount, there are a number of strategies used to protect the life savings, as long as they stay within the “spend down” rules. Money may be spent on house expenses or improvements. A new car could replace an old model.

Another method is the use of a Single Premium Immediate Annuity, sometimes referred to as a Medicaid Annuity Trust. The well spouse can purchase this and protect their life savings. However, if the well spouse dies before the sick spouse, the balance of the annuity will need to be paid to Medicaid to reimburse it for expenses paid for the care of the sick spouse.

One positive note: personal property is not considered a countable asset. Things like home furnishings, decorations, jewelry, etc., and any personal property will not be counted. Embarking on a spending spree with an eye to reselling personal property to raise cash is not a good idea, since few items maintain their value after the initial purchase.

Planning should be done in advance, when both spouses are well and healthy, because Medicaid strictly enforces the five-year look back rule. Any assets transferred within five years of a Medicaid application will make the sick spouse ineligible for Medicaid coverage, and healthcare expenses will have to be paid out of pocket.

Reference: The Bristol Press (July 29, 2022) “What a ‘Community’ spouse can keep”