What is Medicaid Crisis Planning?
Medicaid Crisis Planning refers to situations where someone is currently in a nursing home and Medicaid benefits are needed immediately. This type of planning differs significantly depending on whether the person is single or married.
- For a married couple, we can typically preserve 100% of the assets.
- For a single person, we focus on saving as many assets as possible. In the worst-case scenario, we can preserve approximately 50% of the assets.
This type of planning is highly case-specific, as there are various strategies we can employ.
Medicaid Eligibility for Single Persons
Assets Allowed for Medicaid Eligibility
To qualify for Medicaid, a single person is permitted to retain the following assets:
- House
- Vehicle
- $2,000 in cash
- $1,500 Face Value of Life Insurance
If a single person possesses assets exceeding these limits, there are still planning options available.
Planning Technique: The Half Loaf Strategy
What is Half Loaf Planning?
Half Loaf Planning is a specialized Medicaid planning technique used solely for single individuals.
Our attorneys begin by meeting with the family to gather a comprehensive overview of the person’s assets. Usually, this process involves consolidating those assets. Next, we discuss spend-down options, which may include:
- Pre-paid funeral contracts
- Home improvements
- Hearing aids
- Personal items
The funds can be used for anything that benefits the person in the nursing home. Gifts are not allowed. The key is to spend money on necessary items rather than unnecessary expenditures.
Structuring the Half Loaf Plan
Once the need to spend down assets is evaluated, the attorney calculates how much will be used for the half loaf plan. This strategy involves:
- Gifting a portion of the assets, which triggers a penalty period during which Medicaid will not cover nursing home expenses.
- Loaning the remaining assets through a Medicaid-compliant promissory note. These loaned funds are then used to pay the nursing home during the penalty period.
This method is mathematically calculated and highly case-specific.
Case Study Example
Scenario:
Mom is 84 years old and single. After a fall, she was hospitalized for 3 days and then transferred to a nursing home for rehab. After 3 weeks, the family was informed she had “plateaued” and would be discharged soon. Concerned for her safety, the family decided Mom would stay in the nursing home long-term.
Asset Overview:
- House
- $70,000 in the bank
Planning Process:
- Evaluate any necessary spend-down items (home repairs, funeral contracts, etc.)
- Assume no additional spend-down is needed.
The Half Loaf Plan:
- Gift $35,000 (typically to a child). This triggers a penalty period:
$35,000 ÷ $8,469 = approximately 4 months - Loan $35,000 to the child through a Medicaid-compliant promissory note. This loan is repaid to Mom over the 4-month penalty period and used to pay the nursing home.
At the end of 4 months:
- Loan is fully repaid.
- Penalty period concludes.
- Mom qualifies for Medicaid.
This example is simplified. Precise calculations will factor in Mom’s monthly income and the nursing home’s actual monthly costs.
Frequently Asked Questions
What is the difference between Medicaid planning for single individuals and married couples?
Medicaid planning varies greatly based on marital status. For married couples, it’s often possible to preserve nearly 100% of the couple’s assets. For single individuals, about 50% of the assets can typically be protected using strategies like the Half Loaf Plan.
Can a single person with assets still qualify for Medicaid?
Yes, even if a single person has assets beyond Medicaid’s limits, there are legal planning options available. Techniques such as spend-down strategies and the Half Loaf Plan can help restructure assets to meet eligibility requirements.
What can be purchased during the Medicaid spend-down process?
Acceptable purchases include pre-paid funeral contracts, home improvements, hearing aids, clothing, and other personal necessities. These items must directly benefit the individual entering long-term care—gifting is not allowed.
How does the Half Loaf Plan help preserve assets?
The Half Loaf Plan splits assets into two parts: one is gifted (which creates a Medicaid penalty period), and the other is loaned back via a Medicaid-compliant promissory note. The loaned amount is used to cover nursing home costs during the penalty period, ultimately preserving a significant portion of the assets.
Is the Half Loaf Plan legal and safe to use?
Yes, when executed by an experienced elder law attorney, the Half Loaf Plan is a legitimate and compliant Medicaid planning strategy. It must be tailored to the individual’s financial and medical situation to ensure full compliance with Medicaid rules.