The average cost for a private room in a Kentucky nursing home is nearly $8,000 per month. At around $7,300, a semi-private room isn’t much cheaper. That’s almost $100,000 per year.
You’ve worked hard for your money. You don’t want to have to sell your home to pay for nursing home costs. Medicaid can help with the expense of care in one of the state’s many nursing homes, but you need to be careful if you want to protect your house and other assets.
Medicaid Qualification Requirements in Kentucky
Medicaid can cover long-term care costs for eligible seniors in Kentucky. To qualify, applicants must meet certain criteria:
- At least 65 years of age
- Resident of Kentucky and a U.S. citizen or qualified non-citizen
- Have a medical reason to justify long-term care
- Low income ($2,742 per month as of 2023)
- Countable assets below $2,000 (as of 2023)
The dollar figures above are for a single person. The numbers are different for married couples, whether both spouses or only one spouse is applying for Medicaid.
Certain assets may be exempt from countable assets. Examples of noncountable assets include:
- Primary residence (below $688,000 in equity as of 2023)
- One motor vehicle
- Personal possessions, like clothing and jewelry
- Some life insurance
- Burial contracts and other prepaid funeral costs
Since “primary residence” is on the list of noncountable assets, many people mistakenly think their house is safe. This isn’t always true. If you move into a long-term care facility, your house is no longer your primary residence. Even if you receive in-home nursing care, this can affect your Medicaid application.
It’s best to speak to the estate planning lawyers at Skeeters, Bennett, Wilson & Humphrey to assess your specific situation. Laws and eligibility requirements are complicated. The best plan must be handled on a case-by-case basis.
What Is Medicaid Estate Recovery?
You’ve qualified for Medicaid and you still have your house. However, this does not mean your estate gets to keep your house after you pass away. The state may put a lien on your house as part of the Medicaid approval.
At the time of your passing, the state may call in this debt. Kentucky’s Medicaid agency would seek reimbursement for your accumulated long-term care costs. This is the Estate Recovery Program. Most likely, the largest asset in your estate is your house. Your family may be forced to sell the house to settle this debt. This reduces the inheritance of your surviving beneficiaries.
A Life Estate May Not Be Effective in Protecting Your Home
One option that some Kentucky seniors consider is called a life estate. With a life estate, you retain the right to live in your house for the rest of your life. Ownership is transferred to someone else. This is often an adult child who is added to the deed to your home. Since you no longer “own” the property, it cannot be used to pay back Medicaid.
There are several drawbacks to using a life estate as a way to keep your house.
- The value of the house must be used to pay for nursing home care if the house is sold before you pass away.
- The nursing home can pursue a portion of any rental income. The property may belong to someone else, but the income still belongs to the Medicaid recipient.
- Beneficiaries will be obligated to pay capital gains taxes at the time of your passing.
- The transfer of property ownership is subject to a five-year lookback period.
What Is the Lookback Period?
In the state of Kentucky, Medicaid applications include a lookback period of five years. Any “gifts” made within the five years before the Medicaid application are subject to a penalty period. During this time, they will not cover any nursing home costs. The biggest example of such a “gift” is your house.
If you transfer ownership of your house as part of a life estate, the lookback period applies. If you retain the ability to sell your house, Medicaid may see it as a countable asset. This can affect your eligibility for benefits. It’s also not just your house. The lookback period applies when you transfer any assets for less than fair market value.
This is one of the many reasons why smart, strategic estate planning is so critical. If you can transfer assets or create trusts at least five years before you apply for Medicaid, you may be able to avoid lookback period penalties. The legal team at Skeeters, Bennett, Wilson & Humphrey have years of experience in handling exactly these situations.
What Is a Medicaid Asset Protection Trust?
A Medicaid Asset Protection Trust (MAPT) can be a great way to keep your house and protect your assets. Also called an “income only” trust, a MAPT appoints a trustee to control the principal. The Medicaid recipient only has access to income, like from a pension. At the time of death, the assets in the trust pass to your heirs.
MAPTs are irrevocable. The appointed trustee is most often an adult child or your attorney. In setting up the trust, you can define rules for how the assets should be managed. Assets in a MAPT are protected from Medicaid. However, you must set up the MAPT at least five years before applying to Medicaid for full protection to avoid the lookback period.
If you need nursing home care and apply for Medicaid before that, you get credit for the time the trust has been formed. If you move into a nursing home after four years of staying at home, you only have to pay for one year. After that, Medicaid benefits can cover nursing home costs.
You can also sell your house without a Medicaid penalty since the proceeds of the sale are paid to the trust.
Why You Need an Estate Planning Lawyer for Elder Law
Estate planning is unique to each person. Setting up trusts can be very complicated, let alone deciding on what kind of trust to use. How you plan your estate can impact your Medicaid eligibility. Skeeters, Bennett, Wilson & Humphrey can provide the guidance and insight you need to make intentional, strategic decisions. We can offer sound advice grounded in decades of elder law experience. Protect your Kentucky house and retire with peace of mind.