by Beth Donner, CRPC
Retirement dreams can become a nightmare when disrupted by health problems and the subsequent financial burden of paying for skilled, nursing home or dementia care from a lifetime of savings.
In North Carolina, you have to spend down to $2,000 of “countable assets” before Medicaid picks up the costs associated with long-term or nursing home care. For those with the foresight to plan ahead for the greatest financial risk of retirement, this may involve purchase of long-term care insurance or attempts to distribute assets well in advance of failing health. For those planning in response to an immediate need for skilled nursing care, there are a few strategic ways to obtain Medicaid qualification, including:
- Spend current “countable assets” on non-countable asset items. This might include paying off a mortgage, pre-paying funeral expenses, making repairs to a home, paying outstanding bills or credit cards or replacing an old automobile with a new one. It can be advantageous for married couples not to spend down assets in this manner until the ill spouse is already in a facility. In NC for 2016 the spouse remaining at home (the community spouse) can keep one-half of the couple’s assets up to $119,220.
- Obtain a Medicaid Compliant Annuity. This involves turning a lump sum of (countable asset) cash into a monthly income stream. When structured properly, these types of annuities are deemed inaccessible, actuarially sound and irrevocable; they must also name the state’s Medicaid agency as the primary beneficiary. Savings, retirement accounts or current deferred annuities can all be sources of funds to obtain a Medicaid Compliant Annuity.
- Sell a current annuity income stream for a lump sum of cash. Since there is also a monthly income limit maximum on what the community spouse can have to live on at home, it can be advantageous to turn annuity income into a lump sum so the dollars can then either be spent-down or replaced with a Medicaid Compliant Annuity. The maximum monthly maintenance needs allowance in North Carolina for the community spouse in 2016 is $2,980.50.
It’s important to note that this is a brief list of a few crisis-planning techniques, which need the oversight of an elder law attorney to be executed successfully.
Donner is a Chartered Retirement Planning Counselor and can be reached at 919-601-0501 or Beth@DiversifiedPlanning.com.