Elder Law and Medicaid Planning in 2023

Elder Law and Medicaid Planning in 2023

For senior citizens in the US, Medicaid eligibility forms a central pillar of financial planning. Experienced elder law attorney Gene Carlino shares his sector insights with us in this article, delving deeper into Medicaid’s eligibility requirements, the ‘look-back’ period and how seniors can work with legal counsel to devise sound financial plans that safeguard their healthcare.

To give a foundation for this discussion, could you please briefly outline what Medicaid offers and why it is important for seniors and their families to consider it in their financial planning?

Financing the cost of long-term care is a major concern for many people, especially those approaching retirement. Many seniors are concerned that if one spouse requires long-term care in a nursing facility, the spouse who is living at home will not be able to maintain him or herself in the community in the standard of living the couple enjoyed before the onset of the debilitating condition. Planning with an elder law attorney can help a family position their assets so that they can take advantage of the exemptions and protections that are available under federal and state law.

What are Medicaid’s eligibility requirements in your jurisdiction?

In Rhode Island, for a married couple there is spousal resource allowance of a minimum of $29,714 and a maximum of $148,620. Countable resources are arrived at as of the beginning of the period of placement in a long-term care facility. That sum is then divided in half and the spouse in the community is allowed to retain one half of those resources subject to the minimum and maximum amounts noted. Equity in a home up to $688,000 is excluded from the definition of countable resources. But if the home is in the Medicaid recipient’s probate estate, it is subject to estate recovery by Medicaid.

An at-home spouse is allowed to retain his or her own income, but the spouse in the nursing home must contribute his or her income. If the at-home spouse’s income is below $2,465, that spouse can retain enough of the total income to reach the base amount of $2,465. This base amount can be increased if household shelter costs (such as rent, mortgage, property taxes and homeowner’s insurance, plus a preset amount for utilities) exceed the federally set housing expense allowance, which is currently $739.50.

How does the ‘look-back’ period work in relation to Medicaid planning, and what are its implications for asset transfers for seniors’ financial planning?

On the Medicaid application there is a question that asks if the applicant or his or her spouse has made an uncompensated transfer within the last five years. An uncompensated transfer is essentially a gift, but can apply to any transfer where the person who made the transfer did not receive adequate compensation for the property that was transferred.

If the answer to the question is yes, the next question on the application asks how many uncompensated transfers there were. From there, the amount of the uncompensated transfer is divided by $10,190. This number is called the penalty divisor. It represents the average cost per month in a nursing facility in the state and is published by the state annually. The result of that analysis is to arrive at the number of months that the applicant could have paid for nursing home care but for the gift (i.e. the ‘uncompensated transfer’). This number becomes the number of months that the applicant for Medicaid is not eligible for benefits and is known as the penalty period.

Financing the cost of long-term care is a major concern for many people, especially those approaching retirement.

Importantly, the period does not start to run on the date of the gift; rather, it starts to run as of the first day of the month for which the applicant is seeking benefits. So, for example, if an applicant gave away $101,900 four years before applying for Medicaid benefits by paying for her grandson’s college tuition, and through financial misfortune and a health downturn applied for nursing home benefits as of the fourth year and eleventh month following the gift, she would still be ineligible for a period of 10 months because of the gift.

Transferring assets for purposes of protecting them from long-term care costs is a delicate proposition. There are tax disadvantages associated with gifting assets away, and in some cases the gift recipient may squander the assets in a short period of time. An experienced and knowledgeable elder law attorney can be invaluable in helping the older person to understand all the pros and cons associated with making gifts and to design a plan that best suits the client’s needs. Using a properly drafted irrevocable trust can minimise some of the disadvantages of making gifts.

What types of assets are typically considered countable or non-countable when determining Medicaid eligibility?

As noted above, a home up to the equity limit is noncountable and can be transferred to a spouse living in the community. A home is a primary residence and does not include a seasonal home such as a vacation home or seasonal residence in another state. Care must be taken in the planning process to avoid the probate estate lien discussed above. Other exemptions include personal belongings, such as clothing, household furnishings, an automobile, a prepaid funeral contract and a burial plot.

When it comes to protecting assets while applying for Medicaid, what strategies are most useful in 2023?

Several techniques to help a family properly plan are available in 2023. More options exist for married couples than for unmarried persons.

First, a family should make sure they are taking advantage of the exemptions above. After that, the planning options to evaluate with a client include using an actuarially sound annuity or promissory note. This plan converts countable resources to income and subjects the income to the income tests described above, which can be less harsh than the asset tests, and leave a spouse in the community in a much better financial position as he or she is entitled to retain all of his or her own income.

Also, planning before the onset of a debilitating condition through the use of a properly drafted irrevocable trust should be considered. For a single person who has not planned in advance, there is plan that can protect a portion of the assets. The calculations and analysis for this plan can be complex and the client should work with an experienced elder law attorney.

How can trusts and gifting assets assist with this?

If a client has the time horizon to get by the five-year look-back period described above and he or she has done a careful analysis of his or her ability to sustain themselves in the community without the gifted assets, using an irrevocable trust should be considered. The advantages include being able to select a third party to manage the assets for the beneficiaries of the trust in case the beneficiaries are not yet financially responsible.

Transferring assets for purposes of protecting them from long-term care costs is a delicate proposition.

There can be income tax advantages as well, as there are ways to design the trust to avoid the higher trust income tax rates and to obtain a cost basis adjustment for the assets at the death of the person who created and funded the trust. This will lower capital gains tax when assets are sold after death. Although gifting to a trust is generally preferable, whether gifting to an individual or a trust, a great deal of care should be taken in deciding to gift assets, as once they are gifted the elder will not have the right to get the assets back.

In what ways does Medicaid planning interact with other aspects of estate planning, such as the use of wills, trusts and powers of attorney?

For all clients in their 60s and beyond, an estate planning consultation should include a review of Medicaid planning techniques. Often just ensuring that a well-drafted power of attorney is in place that allows for Medicaid planning is an important step so that planning can be done in the future if an unexpected health event occurs, such as a stroke or brain injury.

What aspects of healthcare are not covered by Medicaid, and how can seniors plan for those potential gaps in coverage?

It should be understood that Medicaid is not intended to provide skilled care of the type received in a hospital. Medicaid was intended to provide for custodial care or care for individuals who are not able to perform activities of daily living, such as feeding, bathing, dressing, ambulating and transitioning. The terms are deceptively similar, but Medicare – not Medicaid – is the program that covers skilled care. Seniors who have entered retirement and who are not covered by a group health care plan to supplement Medicare, and who are otherwise able to sustain themselves in the community, should evaluate a Medicare supplement to cover those skilled care costs not entirely covered by Medicare.

Are there any other comments that you would like to make regarding Medicaid planning?

The statistics are staggering in terms of the likelihood that one will require the type of care a person receives in a nursing home. Planning for this cost, including evaluating a long-term care insurance product and legal plans, should be part of everyone’s planning process.


About Gene Carlino

Please tell us more about your journey into law, and about your practice today.

The law has always intrigued me. It is man’s greatest invention, in theory. Before finishing my education, I knew I wanted to work in the tax and estate planning area. It provides a great opportunity to make a difference in a person or family’s life, or to help opposing parties in a business transaction find common ground.

What aspect of your work do you find most rewarding?

Any time I can help a client solve a problem within my practice area that is vexing them.

Can you share anything about your career plans for the remainder of the year?

At 60 years of age, I have no definitive plans to change my practice. I enjoy practicing within the firm as I know when I do slow down there are great lawyers in our trust and estates department to continue to help my clients. I would enjoy teaching and writing if time allows.


Gene Carlino, Partner

Pannone Lopes Devereaux & O’Gara LLC

Northwoods Office Park, Suite 215N, 1301 Atwood Avenue, Johnston, RI 02919, USA

Tel: +1 401-368-6655

E: gmcarlino@pldolaw.com


Gene M. Carlino is a partner with Pannone Lopes Devereaux & O’Gara LLC. He has more than 35 years of experience in all areas of estate and tax planning and administration, Medicaid planning, probate administration and trust litigation, and he was the inaugural President of the Rhode Island Chapter of the National Academy of Elder Law Attorneys. In 2022, Gene was chosen as a Fellow of the American College of Trust and Estate Counsel (ACTEC) and was selected by his peers for inclusion in The Best Lawyers in America® in Trusts and Estates. He is also a published author and was the recipient of the 2020 Rhode Island Bar Journal Lauren E. Jones, Esq. Writing Award.

Pannone Lopes Devereaux & O’Gara LLC is a multi-discipline firm always seeking to implement cost-effective solutions for their clients. Employing innovation and collaboration, the firm’s attorneys provide the highest level of legal counsel in multiple disciplines.

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