Medicaid Planning with Assets, with transcript
Holly Simpson is an experienced Estate Planning and Elder Law Attorney in North and South Carolina. Prior to obtaining her law degree, she was a licensed family therapist and helped hundreds of families navigate various life difficulties. Holly graduated at the top of her law school class while juggling the demands of her 6 children. She started Simpson Law Firm because she wanted to continue helping families by creating plans to protect their assets and their loved ones
Frank Samson: Welcome to Boomers Today. I'm your host, Frank Samson. Of course, each week, we bring you important useful information and issues facing baby boomers, their parents, and other loved ones.
We have with us Holly Simpson, who is an experienced estate planning and elder law attorney. She covers both North and South Carolina, but will certainly talk to us about elder law around the country. Prior to obtaining her law degree, she was a licensed family therapist and helped hundreds of families navigate various life difficulties. Holly graduated at the top of her law school class, while juggling the demands of her six children. She started Simpson Law Firm because she wanted to continue helping families by creating plans to protect their assets and their loved ones. Holly, thank you so much for joining us on Boomers Today, really appreciate it.
Holly Simpson: Frank, so happy to be here.
Frank: Yeah. Great to have you. Great to have you. You got a great background. You're a licensed family therapist and an elder law attorney, so we're going to learn a lot from you today. I'm really looking forward to it. When we talk about elder law or an elder law attorney, what should people understand that is? What does an elder law attorney do versus other attorneys?
Holly: Yeah, thanks Frank. An elder law attorney is someone who specializes in estate planning for people who are over 65. We say we help people to prepare to protect their assets and to prepare for the possibility of paying for longterm care. I feel like my job is to help educate people to stay in control of their money and property for the rest of their lives, and to help them protect their assets as they age. Preparing an estate plan for someone is over 65 is a lot different than preparing an estate plan for, say a family with young children. There're certainly very important things that need to be in place when you have young children, naming guardians and putting the assets in a trust so that those assets can be managed for your children.
It looks very different when you're 65 and your children are raised and they're adults and you're looking forward to the rest of your life and starting to contemplate, "Oh. Wow. Maybe there's the possibility that myself or my spouse," if I'm married, "Could be sick and could require longterm care down the road. Elder law planning is kind of fun, because there's a lot of, they're not secrets, but they're kind of unknown things out there that just this a little bit of knowledge can really help people stretch their assets and not have to spend down all of their assets in order to pay for their longterm care and really get to plan for how they want to live the end of their life.
Frank: Yeah. As we both know, it could be pretty expensive. When I say expensive, I'm not talking for the attorney, it could be expensive for care.
Holly: Right. Yeah. I know here, I'm here in South and North Carolina, I'm on the border of South and North Carolina so I practice in both states. Around here, the average cost is around 8,000. I know that's pretty low, actually, for the country in general. My partner here, she's from Massachusetts, and I know up there, the average care was 12,000 a month.
Holly: It can vary greatly across the country and that can whittle down your life savings very quickly.
Frank: Yeah. I'm sure that, I know that those numbers that you're throwing out there, certainly I know they're accurate depending on the situation. It depends if you're in skilled nursing, it depends if you're in assisted living, it depends if you're getting care at home. That could be a wide range, of course.
Holly: Oh yeah. Absolutely. Absolutely.
Frank: Right. Right. So let's talk about something that, a subject matter that I think confused many, and I could understand why, we're talking about a lot of government programs. How you would explain to your clients if they said, "Well, tell me what's the difference between Medicare and Medicaid?"
Holly: Yeah, absolutely. We get asked that question all the time. Medicare is the government insurance program for people who are over 65. Almost anyone is eligible if you're a citizen. Then you also will have maybe a little bit of a premium for a supplement with that. I have a lot of folks that are on Medicare. Medicaid is also a government insurance program, but Medicaid is one that you qualify for based on the amount of assets you have and based on your income.
A lot of folks get those two confused. The one difference is, is that Medicare itself does not pay for a nursing home for very long. So nursing homes under Medicare, they'll pay for the first 20 days, they got you covered. After that, you got a copay for, I think it's $175 for the next 80 days. Then after that 100 days, Medicare will no longer cover your stay in the nursing home. Remember Medicare is the program that most people over 65 have to cover their healthcare. So after a hundred days, you're left to either pay for it out of pocket, hope that you were wise enough to buy a longterm care insurance policy while they were affordable and before you had too many birthdays that make the premiums go up. Yeah, or yeah, like I said, or you're paying out of pocket, which can be very costly, really quickly.
Medicaid, on the other hand, that's the program we said you qualify based on your assets and your income. That program will actually pay for a nursing home at a hundred percent. A lot of folks don't realize that there's some great legal tools we can use to make it so that your assets and income are such that you could qualify for Medicaid. That's kind of the fun part of my job, is turning on the light bulb a little bit for people and letting them know that, "Hey, you know what? You thought maybe you didn't qualify for Medicaid because you owned a car and a house, but guess what? We've got some legal tools. We can help you get qualified and then help you get some help paying for that nursing home because you need it."
Frank: Let me ask you this. I get to ask this as you know, I'm in the industry, I'm not an attorney, but I'm in the industry. I get these questions all the time too. I'm going to tell you what I say to people, and you tell me if you agree, from a legal standpoint, if I'm explaining it right. Medicare, the way I've explained it is, it's kind of like your health insurance that you would have if you had through your company or through some other group plan. In this case, it's being provided by the federal government when you, if you've earned it, when you turn the age of 65. Okay. Medicaid, I define as that's more like longterm care insurance. However, that's paid for by the federal and state government together. It only covers what is considered healthcare. Nursing falls into healthcare, but assisted living, depending on a state by state, doesn't fall into healthcare. Is that, what do you think about that?
Holly: Well, actually in some states, Medicaid does cover living expenses. It’s because it’s funded by both federal and state governments. The state governments make their own rules about what Medicaid covers. Sometimes that's assisted living and also, I know in South Carolina, they provide a really great home care service. So if there's home health, Medicaid will help cover some of that.
If you just Google about Medicaid, you probably aren't going to come up with great information because it's going to be about your state. A lot of it will be federal information. Also, the thing to remember about Medicaid laws is they change a lot, state to state, especially, and even within the state, Medicaid laws are updated a couple of times a year here and the numbers change. So it's important that you don't always just take what you get off of a Google search about Medicaid in your state. Really talk to someone who does it every day. Someone who specializes in elder law, because they're going to be up on the latest laws and the latest numbers and the latest asset limits and what can be counted against you and counted for you. I know the laws change around this pretty rapidly, actually.
Frank: Yeah. I think there's a perception out there by many that Medicaid is really for people who are very poor and are totally out of money. Either they're going to be living in the street if they need care, but the federal government kicks in and says, no, if you need care and you're out of money, you can then stay in a nursing home. If that's the type of care you need, but that's not the case, it is maybe the intention, I think, was for people who are out of money and need care. However, at least that's the perception. That's not necessarily the case is it?
Holly: You're exactly right about that. I think probably one of the number one calls we get, and a client I had yesterday afternoon, actually, they came in and the spouse, she had Parkinson's and it was, she was concerned that she might need longterm care insurance soon or longterm care soon. This couple was all ready to sell their house and their car because they had heard that you can't have anything in order to qualify for Medicaid. You can't have a house, you can't have a car. You've got to be really poor. They're trying to give away some of their assets to their children.
Fortunately, they came into my office before they did that because that's just not true. You can keep your car, most, I think all jurisdictions, you can keep your house, whether you're single or married in most jurisdictions. Yeah. You can have, you can keep some assets in your name and there, in fact, if you try to get those assets out of your name, thinking you don't have to have anything before you can qualify for Medicaid, sometimes you might cause some problems when you do go to apply for Medicaid, because you're going to get penalized for giving that car away or giving that house away. Medicaid will look at that as a gift and they can go back and say, [crosstalk 00:14:30] you're not going to be qualified for an extra year. Yeah.
Frank: Right. There's that, what's called maybe that look back period. Maybe explain that look back-
Holly: Right. Yeah. In general, Medicaid is going to look, in most states, they are going to say, they're going to look at your assets that you've had for the last five years. Anything that you give away in that five years that's over maybe $500, they're going to ask you to account for that, because in the eyes of Medicaid, if you had money that you could give away, then you could have used that money for your care. So they're going to penalize you if you've given stuff away within the last five years. They don't like that. By penalize, meaning, you may not be eligible for Medicaid for a few more months than you would have wanted because they said, "Oh, you had some money that you gave away. You got a six month penalty. Now you're going to have to pay for your own care for that six months."
Frank: If the senior does have assets, is there a way to protect those assets while still getting on Medicaid? That could be very expensive. You could go through somebodies assets pretty quick. We were talking about how expensive nursing could be.
Holly: Yeah. Absolutely. There's some really cool, exciting tools that are out there to help you to protect some of your assets, so that you don't have to spend all of your money that you've worked so hard and saved your whole life for just to see it paid away down to the nursing home. Ideally, the further ahead you plan, the more of your money you could save. We talked before the break about a five year look back. If you can create, what we call an irrevocable trust, and you can do that five years before ever need Medicaid, anything within that trust five years ahead of time, the government is not going to look at that as if that is your asset, because you don't technically own it anymore. The government, or sorry, your irrevocable trust owns that asset. So it's not yours.
We can shield a lot of assets inside of that irrevocable trust. We can shield things like your house, stocks, security accounts, savings accounts. One thing that we generally never put inside an irrevocable trust is an IRA or your 401k. I know for a lot of Americans, that's one of their biggest assets. You've got your house and your 401k. However, just because you've got a large amount in your 401k or IRA that's sitting there, does not necessarily mean that you're not going to be able to qualify for Medicaid. In a lot of states, they do not count that IRA against you as an asset. Say you've got a couple of hundred thousand dollars sitting in an IRA. I know in North and South Carolina, they don't look at that as if that's your asset. They count that as income against you, whenever you start taking out the required minimum distributions. As long as you're taking out your required minimum distributions, Medicaid's going to look at that and say, "Oh. That's not an asset, but we will count that income against them."
Like we talked about before, Medicaid's a program that looks at your assets and your income. There's also ways, tools we have to make sure your income doesn't look like it's too high. There's other kinds of trusts, commonly called the Miller Trust. So if your income's above that threshold that Medicaid says you can make, and I say a ballpark figure across the country is probably around $2300 a month, is probably about average what Medicaid says you can have is income. If your income is over that, we can create a special Miller Trust that can hold some of your excess income and still allow you to be qualified for Medicaid. Income, for most people, is going to look like social security. It's going to look like those required minimum distribution's. Income might also be, yeah, just interest you make off your investments. It could be annuities that are paid out to you. All of those things will count as income against you, but a lot of states will allow you to use that Miller Trust so that your income looks more like it's under that 2400 per month range.
Frank: Let's say there's a senior, the seniors in his or her eighties. Health-wise, they've got their issues, but nothing major going on. We know the statistics. Probably that person has a high percentage of probably going to need some sort of care in the future, whether it's the following year or five years from that point or whatever.
Frank: People don't necessarily think that, "Hey, maybe my mother or my father, or myself," if you're talking about yourself, "Should get on Medicaid." So how do you kind of plan five years in advance? I mean, do people you know once you say the trigger is that my mother or my father are having a lot of challenges or they've been diagnosed with a dementia diagnosis, or they recently had a stroke and we got to protect their assets. Is that going to be too late?
Holly: No. I started with irrevocable trust because it's always easier to plan ahead and not procrastinate. When you plan ahead five years, we can save nearly a hundred percent of your assets a lot of the time.
Even if mom's already in the nursing home or mom's going to be in the nursing home the next year or so. The trick is we just can't save as many of your assets when it's closer like that. There are some things you can still do, and in different states, those strategies will vary. I know here in the Carolinas, there are things we can do with your home to transfer that ownership a little bit, so that doesn't become a problem for you.
I'll talk about that in a minute. Another popular thing we can do is, they're called Medicaid compliant annuities, and we can teach you about how you could purchase, use your assets to purchase a Medicaid compliant annuity and how Medicaid generally doesn't count that against you, so that helps to preserve some of your assets as well. So there are definitely some things, we call that crisis planning.
We talked earlier about, you can keep your house and get on Medicaid, but what happens, I think that the reason why that myth got started, and it's just a misunderstanding, what happens, you can keep that house while you're alive. Medicaid won't count that against you. When you pass away, that house is still there and Medicaid can come and put a lien on that house and your estate to try to recoup all of the money that they paid for your care. If Medicaid paid out a hundred thousand dollars for your care while you're in the nursing home, after your death, they're going to come back to your house, lien that house and the estate will have to pay out the hundred thousand dollars. There's a lot of great legal tools that we can use to help avoid that estate recovery so that you can pass that house to your loved ones, or maybe it's a house that's been in the family for a couple of generations and you want to keep it that way. There's lots of tools we can do around that.
Frank: I think if we accomplish anything in our discussion today is to advise people, don't try to do this yourself. Don't make any decisions yourself as it relates to moving money around or moving things in other people's names, don't do that. Right?
Holly: Right. That moving the house comes with a lot. A lot of people think, well, it'd just be cheaper, it'd be a great estate plan to just move the house into my son's name before I pass away.
Frank: I have one more question, but before we get to the question, because we only have a couple minutes left here. I want you to share with everybody how they could get ahold of you, should they want to learn more about your firm and any help that you'd might be able to provide, and also, maybe share with them if they are not in North or South Carolina, how they could get advice from that standpoint. I'll let you take that away and then I'll give you my final question.
Holly: Thank you, Frank. Yeah. My name's Holly Simpson, and I'm the owner of Simpson Law Firm. We're here in North and South Carolina. Probably the best way to get ahold of us will be our website. That is hollysimpsonlawfirm.com. It's Holly, H-O-L-L-Y. Simpson, S-I-M-P-S-O-N, lawfirm.com. Yeah. We help lots of families here in the North and South Carolina areas. That being said, we're also connected with a network of nationwide elder law attorneys. We go to events together and we get on list serves together and help each other out. So if there's anyone outside of the Carolinas that's looking for someone who's really specialized in elder law, really would know what they're talking about. Feel free to contact us on the website. Also, you could call us on our phone number, it's (803) 764-9555. We'd be happy to introduce you to some really great, qualified elder law attorneys throughout the country.
Frank: Great. Holly Simpson, check it out. hollysimpsonlawfirm.com. Thank you so much for joining us on Boomers Today. Really appreciate it.
Holly: Yeah. Thank you, Frank. That was fun. Appreciate it.
Frank: Yeah. I want to thank everybody for joining us on Boomers Today. Please, please be safe out there. We'll talk to everybody real soon. Thank you so much.