By Lanman Rayne Nelson Reade, 207-671-5454
The most common concern people bring to their Elder law Attorney is how to protect assets from the high cost of long-term care. To begin this conversation, it helps to have a basic understanding of MaineCare.
MaineCare in a Nutshell
Medicaid, called MaineCare in Maine, is a federal and state program that, in part, provides public funds to assist with long term care costs. To become eligible for MaineCare for long term care, you must meet certain asset and income guidelines, which vary depending upon whether you are applying for assistance with in-home care, assisted living care or nursing home care. Additionally, gifts of your assets made within five years of a MaineCare application receive a penalty which will cause you to be ineligible for MaineCare for a period of time. Here are some of the pertinent rules:
Income: In general, the income of the MaineCare applicant must be below the private pay rate of a semi-private room in the facility where the applicant is residing. For applications for assistance with in-home care, the current income limit is $2,742.00.
Asset Limit: In general, to be eligible for MaineCare, an applicant is allowed to have no more than $10,000 in “countable” assets. If the applicant is applying for nursing facility care and has a spouse at home, that community spouse can keep up to $148,620 (2023) in “countable” assets. If the applicant is applying for MaineCare for assisted living or for in-home care, the community spouse’s assets are not countable.
Not all assets are countable. A few examples of “non-countable” assets are: a primary residence; real estate co-owned with others; income-producing property or equipment; one motor vehicle; a prepaid burial contract; household goods and term life insurance.
Transfer (Gifting) Penalty: To determine the “gifting penalty,” the State will total all gifts made within the 5 years preceding the MaineCare application, and divide that sum by $10,739, which is the 2023 penalty divisor. The result is the number of months you will be ineligible for MaineCare to pay your long-term care costs. There are a few exceptions to the gifting penalty; such as, there is no penalty for transfers between spouses and transfers to a disabled child.
Estate Recovery: Keep in mind that when a MaineCare participant dies, the State will make a claim against the MaineCare participant’s estate for all costs expended by the State for nursing home or in-home care. Currently, there is no estate recovery for Assisted Living MaineCare.
Strategy #1: Spend Down
To reduce countable assets, you can purchase non-countable assets such as a pre-paid burial, or even rental property. Paying off debts like a mortgage or car loan, and/or purchasing items that may be of necessity in the near future, like hearing aids and wheelchairs, are also good spend down strategies.
Strategy #2: Reduce the gifting penalty
Although MaineCare penalizes all gifts made within five years of a MaineCare application, the penalty is reduced by approximately one-half when, after the applicant applies for MaineCare and receives the gifting penalty, the gift recipient returns approximately one-half of the funds, usually by paying the money to the long term care facility.
Strategy #3: Transfer funds to your spouse
The MaineCare rules for Assisted Living and for In-home care do not count assets in the healthy spouse’s name; therefore, the MaineCare applicant can transfer assets to the healthy spouse and become eligible for those two programs.
Strategy #5: Gift to an Asset Protection Trust
Individuals who feel reasonably confident that they will not need long-term care for five years or who have substantial assets, may wish to give away assets to their loved ones. Making outright gifts can be risky as it can expose the asset to creditors, so it can be helpful to give assets away in an irrevocable trust for the benefit of your loved one.
Strategy #6: Pre-Plan
The first step in asset protection planning is to ensure that you have a validly executed Financial Power of Attorney with broad powers to gift and create trusts. Without this document, it may be impossible to protect your assets after you become incapacitated. Additionally, if your spouse is diagnosed with a condition that may require long-term care, it is important to revise your Will to leave assets in a special needs trust for your spouse instead of outright. Assets in the trust would be non-countable and would enable your spouse to be more readily eligible for MaineCare.
Conclusion: The strategies discussed above may have tax consequences, and other important risks and benefits. No one strategy works for everyone. If you are considering taking steps to protect your assets, it is critical to speak with an experienced Elder Law Attorney who will guide you toward the best strategy for you, based on your specific goals and circumstances.
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