Three Basic Criteria for Medicaid Planning
A Radio Interview of Attorney John R. Frazier by Attorney Joseph Pippen
A complete transcript of the program begins below:
Attorney Pippen:
If you have a question for John, please call in also, and good morning Mr. Frazier.
Attorney Frazier:
Hey Joe, how you doing today?
Attorney Pippen:
I’m doing great. So what’s our Medicaid tip of the week this week?
Attorney Frazier:
Well, today I’m going to talk about the three basic criteria for Medicaid planning. These rules apply to both assisted living and a resident of a nursing facility, and there are just three simple criteria. There’s a healthcare criteria which states basically that the person has to have a medical need to be either in the nursing facility or the assisted living facility. Then there are asset limits. Your Florida house and a car are exempt, and then outside of those two primary exempt assets an unmarried Medicaid applicant is allowed to have $2,000 in countable assets.
If there’s a spouse in the community, the spouse in the community is allowed to have $130,380 in countable assets, and if both spouses are applying for Medicaid, there’s a $3,000 countable asset limit. And then the third criteria is that there’s an income limit here in Florida, and this year the income limit is $2,382 a month in gross monthly income for only the Medicaid applicant spouse. Those are the three basic criteria, and the planning that we do is geared to meet them. When we evaluate a case, we make sure that we’re going to be able to meet these three criteria in every case, and if for some reason we can’t meet one of those criteria, we will not accept the case. That’s a basic overview of the three criteria.
Attorney Pippen:
You know John, a lot of people think they have to sell their homestead, to get rid of the home or sell the home or they choose to sell the home so they have money to pay for a nursing home. What do you advise a client like that, that has that thought?
Attorney Frazier:
That’s a very, very serious mistake. The Florida homestead is exempt up to $603,000, and that’s for an unmarried person. If you have a spouse living there, there is no limit on the homestead. It’s very, very important to speak to an attorney who knows these rules. Another mistake that I regularly see is for some reason we’re seeing a whole number of these cases right now, potential Medicaid recipients giving their house away to their children. There is a five-year look back on this type of a transfer, even though the house is exempt under the Medicaid rules. If you transfer the house within five years of the Medicaid application it creates a disqualification period, so what we end up having to do, and typically these individuals are not speaking with an attorney, they’re just going out and finding a quitclaim deed on the internet and not speaking with an attorney. The very first thing we do is we reverse that transaction and put the property back into the name of the Medicaid applicant. People have to be very, very careful about what they do regarding the homestead property.
Attorney Pippen:
John, what happens if some persons who’ve been in the nursing home and they maybe apply for Medicaid a little bit after they’ve been in the nursing home, but their house has been rented out and they’ve been collecting rent money to help pay for the Medicaid expense? Does that mess up the homestead in your planning because it’s no longer homestead because it’s been rented?
Attorney Frazier:
We have had a few people do that and it does not prevent the person from getting Medicaid, but it’s not necessary to rent the homestead. I think generally it’s not a good idea for several different reasons. If you have an unmarried person on Medicaid, the amount that you have to pay to the nursing facility is the monthly income of the person, so there is no reason… well, the monthly income minus $130, which is called the personal needs allowance minus anything for health insurance. You don’t want to do anything that would create extra income, so it’s unnecessary to do that because the Florida Medicaid program is going to pay for all of the medical costs and the cost of the facility in excess of the person’s income.
I think another potential problem is that you could destroy the status of the homestead protection when the Medicaid recipient dies and that would open the door for Medicaid estate recovery against the homestead potentially if that property goes through probate. However, if the property goes to the natural heirs, then as a general rule, if it’s a homestead property, the State of Florida can’t recover against that property. However, if it’s treated as a rental property, the State of Florida can recover against that property and to pay back Medicaid, so there are several downsides to renting the homestead property, and I advise people not to do that.
Attorney Pippen:
Yeah, well the excuse I hear from family members who want to rent the house after the mom or dad’s gone on Medicaid, is they’re trying to have money to pay taxes and maintenance and insurance cost of the home. They want to try to recover that because the homestead’s so big and that the parent’s in the nursing home, so that’s the excuse they use, but then I try to explain what you just said, that you’re messing up the homestead status and that could jeopardize the Medicaid and the homestead exemption and how it passes upon death and what claims can be made upon, all the things you just said come into play, and people never really even think about those when they thought, well, I need to make a little money to pay the insurance and real estate taxes.
Attorney Frazier:
Yes, and I do talk to clients about the three basic criteria for Medicaid Planning. Most of my clients end up selling the property if they’re concerned about paying for the ongoing expenses. In theory, you could rent it. If you do it properly it won’t cause a problem for Medicaid, but again, you’re converting an exempt asset into a non-exempt asset and creating the risk that the State of Florida could recover and obtain Medicaid payback on the entire value of that house, depending on the amount of money paid out by the taxpayer.
Attorney Pippen:
Is there an issue with a family member who moves into the house? Let’s say they move into the house, in my example here, they move into the house, the homestead, before the parent goes into the nursing home. Would they be allowed to generally stay in the house after the person goes into the nursing home, without any complications?
Attorney Frazier:
I have not seen that be a problem. The State of Florida… As long as the person lived in the property basically I think for one day prior to going into the nursing facility, the State of Florida is going to treat that as an exempt asset, so I don’t really see a problem with a family member living there.
Attorney Pippen:
I’d have trouble with other family members who now have a person sponging off of not paying rent and living in the home, and we got to see that-
Attorney Frazier:
Yeah.
Attorney Pippen:
… come up between children. Just fighting between one another.
Attorney Frazier:
Yeah. Yeah, that could be an issue. I think if somebody is in a nursing facility though, when we’re talking about the value of these benefits, the average cost of care, actually historically for the past year or so, it’s been about $9,500. It actually just bumped up to about $9,700 a month. We’re talking about almost $10,000 a month in costs, and I’ve mentioned before on the show that there’s one facility in North Pinellas County charging $17,000 a month. So let’s say that the person has monthly income of $1,000 and keeps the 130 personal needs allowance in a health insurance. So you’re paying maybe $800 a month for a facility that may charge $17,000 a month. I think when you look at the financial analysis, and everybody realizes the great value of the Medicaid planning, most family members are not going to do anything to disturb the Medicaid benefits once they’re established if you talk to them about the value and the amount of money that the government’s paying out each month.
Attorney Pippen:
John, we’ve posted a number of these conversations like this one on three basic criteria for Medicaid Planning that you and I have had on Sunday mornings on your website, where people could go there and listen to multiple topics concerning Medicaid. Why don’t you give the audience your website address where they can get more information about Medicaid?
Attorney Frazier:
Well, I have my own specific website geared towards Medicaid planning and VA benefits, and that website address is www and then it’s a dot and then three words after that, estate, E-S-T-A-T-E, then the next word is legal, L-E-G-A-L, and then the next word is planning, P-L-A-N-N-I-N-G dot com, so www.estatelegalplanning.com, and then, of course, we have your main office website, attypip.com.
Attorney Pippen:
All right, and John, give us your contact information. Anyone who wants to call you and get more information directly. It may be about a current problem or a Medicaid situation, or maybe they’re on private pay and they see that 10,000 a month disappearing and they’re saying, “Well, maybe Mr. Frazier can help me save that and qualify for Medicaid, protect the legacy.” So how do they contact you directly if they would like to talk to you?
Attorney Frazier:
The office number is 727-586-3306 and I’m at extension 104. My primary cell phone number is 727-748-5374, and my email address is John, J-O-H-N, at attypip.com.
Attorney Pippen:
All right, John, Well I hope you have a great Sunday. Thanks for calling in.
Attorney Frazier:
Okay. You too. Thank you very much for bringing us the information on the three basic criteria for Medicaid Planning.
Attorney Pippen:
Right. Thank you.
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