Before we get into the caregiver child exemption, we have to provide the necessary background information so you know why it may be relevant to you and your family.
Medicare will serve as a health insurance foundation when you become eligible at the age of 65 if you have paid into the program sufficiently. However, there are out-of-pocket expenses, including 20% of all covered visits to doctors and outpatient care. You should educate yourself and budget for these costs in advance when you are developing a retirement plan.
Most people can manage these expenses, but there is one gaping hole in the Medicare coverage that is not easy to overcome. The program does not pay for the custodial care that you would receive in a nursing home or assisted living community. These facilities provide custodial care, and Medicare does not cover this form of assistance.
At the time of this writing, the average charge for a year a private room in a nursing home in North Carolina and Kentucky is somewhere in the vicinity of $70,000. That’s a lot of money to come up with toward the end of your life, and a married couple could face two different rounds of nursing home bills.
Medicaid is a jointly administered federal/state government health insurance program that does pay for custodial care, but it is needs-based. You cannot qualify if you have more than $2000 in countable assets, but the word “countable” is important.
Assets that are not countable include one vehicle that is used as a primary source of transportation, wedding rings, engagement rings, heirloom jewelry, household items, and personal effects. An applicant can generally have unlimited term life insurance and a limited amount of whole life insurance, and an applicant can save $1,500 for final expenses.
Your home is not counted either, but there is an equity limit. In the states where we practice, it is $585,000 in 2019. You may see a slightly larger figure next year when an inflation adjustment is made. There is no asset limit at all when a healthy spouse is living in the home (but watch out for estate recovery).
When a married person is applying for Medicaid to pay for long-term care, the healthy spouse is entitled to keep certain additional property, which we will discuss in another blog post.
Medicaid Look-Back Period and Estate Recovery
You could give resources to your loved ones in an effort to stay within the asset limit, but there is a five-year look back period. If you give gifts within five years before you submit your application, it will probably be denied.
There would be a period of ineligibility that is determined based on the amount that you gave away as it compares to the average cost of long-term care in your state. Using the figure of $70,000 a year, if you gave $140,000 in gifts within the five-year period, you would be ineligible for two years.
This look back would be waived for a gift of your home if you have the ability to utilize the child caregiver exemption. If you do not have to enter a nursing home because one of your children is giving you the care that you need at home, the exemption could be applicable.
As long as the child was providing this care for at least two years and you meet the other requirements of the exemption, you could transfer ownership of the home to the child caregiver and the five-year look back would not apply.
Schedule a Consultation Today!
We would be glad to answer any questions that you have about nursing home asset protection in person. You can schedule a consultation in North Carolina if you call us at 704-944-3245 (Charlotte, NC or Huntersville, NC), and our Kentucky numbers are 606-324-5516 (Ashland, KY) and 859-372-6655 (Florence, KY). We also have a contact form on this website that you can use to send us a message.