5 year look back tricksProbably about half of the estate planning clients we meet with have come to us after mulling for several years over the threat of Medicaid seizing assets in the event someone goes into a nursing home. It must be that the 5 year lookback rule frequently comes up in dinner conversations. But approximately 100% of these clients leave our office feeling better. We’d like to believe that their relief is due to our sound advice and recommendations, and it is – in part. We’re certainly familiar with fixing documents created after unsound advice – from attorneys who do not specialize in MassHealth planning. But that is because we are often sought out as Medicaid problem solvers. So our advice is surely helpful, but our knowledge and success is based on experience and a careful examination of facts. This article explains how we analyze facts to navigate MassHealth planning in a way that most other attorneys do not.

How Much is Enough (or Too Much) to Avoid a MassHealth Lookback?

Some of these facts are simply numbers, like the size of the estate. This is the first and most important factor to consider when looking at a Medicaid planning strategy. The cost of nursing home care is high, but the cost of giving away control of assets for at least 5 years can be much higher. Probably 75% of attorneys will put assets into an irrevocable trust in the instant they are asked to. We do not. Families with their home as a primary asset, for example, should almost never put that asset into an irrevocable trust! Consider, for example, what would happen if the family wanted to move, or use equity in the home for unforeseen expenses. The same rule goes for any primary asset relied upon by a family. Moderately wealthy clients by contrast can afford to put a second home in an irrevocable trust, and very wealthy clients shouldn’t be concerned with Medicaid at all. Therefore about two thirds of clients who ask us to draft an irrevocable trust to avoid Medicaid liability are advised by us not to do so.

What if a MassHealth Applicant is Married?

Marital status plays a very important role in applying for MassHealth. When one spouse is at risk of needing long term care at a nursing home in the near future, the other spouse might be hesitant to initiate an application. And that is because, for purposes of the MassHealth application, the assets owned by one member of a marriage are also owned by the other. But the regulations actually provide many protections for this other spouse, known as the “community spouse.” A transfer of any marital assets to the name of the community spouse only, for example, is a transfer that avoids the 5 year lookback rule. And the community spouse is able to own a substantial sum of assets by him or herself, but there are some limits.

(Read: Calculating Eligibility for MassHealth and Medicaid)

one parent in nursing homeThe house of a married MassHealth applicant, in addition to the sum of other assets, will similarly not be subject to a MassHealth lien if it is transferred in a timely manner to the community spouse. There again are value limitations in the regulations on the amount of equity in real estate, mainly to prevent people with $2 million dollar estates from getting free benefits, but the limitations are very reasonable. The right to a certain amount of income too, can be transferred from the nursing home resident to his or her community spouse. All of these provisions and allowances are in place to ensure that when one spouse goes into a nursing home, the other is not left out in the cold. So for our married estate planning clients, we’re always keeping these provisions in mind.

Children of the MassHealth Applicant at Home or in Need

Clients calling us for immediate MassHealth application counseling are often the children themselves, but with our MassHealth/Medicaid planning clients, we learn of the children from our initial consultation. Like those provisions allowing for transfers to the applicant’s spouse, Medicaid regulations also find that transfers made to children in certain instances may overcome the 5 year look back rule.

If one of the applicant’s children is taking care of him or her prior to a nursing home entry, the law does allow monetary transfers to such a child under certain circumstances. Although very difficult in Massachusetts, it is possible to set up a contract so that the child is paid for taking care of his or her parent. The key in these contracts is that they must be done in advance, and adhere to most of the formalities of any employment relationship.

caretaker child exceptionAnother option may arise if the child of an applicant is disabled. Assets may be transferred to that child provided that he or she meets the MassHealth definition(s) of “disabled.” Like with a personal care contract, satisfying MassHealth on this definition can be a challenge, but a specialized MassHealth attorney knows what type of individuals qualify. In many of these cases, our attorneys will often set up a special trust to hold these assets for the disabled individual’s benefit. Primary residences and retirement accounts are the most common assets granted with our clients.

By far the most frequent transfer to a child is in a situation under which MassHealth defines a “caretaker child” exception to the 5 year lookback. Provided that the child has lived in the applicant’s home for at least two years, and has provided a certain level of care to the parent, he or she may be granted that home when the parent is admitted to a nursing home. Certain medical records and proof of residency are required of course, but the MassHealth regulations in this instance are not overly burdensome.

How to Prepare for MassHealth & Avoid the 5 Year Look Back Period

What we want as attorneys is for new clients to visit with us as soon as possible. There is no monetary motivation for this since our initial meetings are provided at no cost, but analyzing a situation earlier rather than later always makes MassHealth preparation easier. Even though many times we simply advise clients to hold off on taking any action, ensuring that a client is informed of his or her options tends to streamline work to be done down the road.

For more information on how assets can be structured or titled in anticipation of a MassHealth application, or for strategies on how to overcome the five year look back provisions, our attorneys are just a click or phone call away. Visit our contact page or call 508-888-8100.

Consumer’s Guide to Medicaid Planning