Charlotte Edition


By James W. Mallonee

BASIC MEDICAID PLANNINGThe costs to go into a nursing facility can easily wipe out a person’s savings. Should you be in a situation where institutional care is required (e.g. broken hip or dementia) and you want to divert as much of your savings to your children as is possible but not give up the medical care you’ll need in your remaining years of life, then consider Medicaid Planning. To accomplish Medicaid Planning you’ll need to talk to someone who is experienced in this area.

Medicaid is a government sponsored program designed to make certain that a person will have access to basic medical care. The original idea of Medicaid was to make available medical care for those individuals who were not able to afford the type of care they needed. It was considered the last means of medical insurance for an individual who could not afford proper care. However, it has morphed into a means of preserving a person’s assets such that it will pass to one’s children without being eaten up in medical and daily care expenses.

As you may know there are two major eligibility criteria to be met in order to participate in Medicaid. They are income and assets. Generally, a single person’s monthly income from all sources must be less than $2,300.00. A person’s countable assets must be less than $2,000.00. If you are under the two major eligibility criteria, then for the most part you are eligible for Medicaid. However, if one of the two criteria are over the limit, then in such event, you’ll need to talk to a Medicaid Planner for direction.

Suppose your monthly income is greater than $2,400.00 per month for a single person. Your Medicaid Planner may suggest the following means of reducing your monthly income by having a Qualified Income Trust (“QIT”) prepared for you. What a QIT does is take your monthly income and places it into a trust managed by a a third party called a Trustee. The Trustee would be responsible for marshalling your income and paying any and all obligations from the amount of monthly income entered into the trust. Any excess funds remaining in the Trust following the death of the Grantor will be returned to Medicaid up to the cumulative amount expended by the State for your care. This will include the cost of staying at a nursing or rehab center.

Should a person’s assets exceed the $2,000.00 threshold, your Medicaid Planner will suggest a number of tools available to get a person eligible.

The countable assets that make up the eligibility threshold are everything except the following non-countable assets: homestead, rental property, one car, an annuity that is paying monthly and a promissory note or mortgage where you are holding the note. Although the non-countable asset list is not completely exhausted, they make up a majority of those that are non-countable assets.

Keep in mind that your residence (if you are a permanent resident of Florida) is not a countable asset for purposes of Medicaid eligibility. Florida’s Homestead Laws protect the permanent residence of an individual from creditors. Medicaid is considered a creditor and therefore your Florida home is generally not a countable asset for recovery purposes.

What if I purchase property and rent it out? In this type case the rental property is considered income producing and would fall under the monthly income threshold. It is important to make certain that the monthly income is the fair market value for rental property in the area where it exists.

Should you have rental property, it’s a good idea to have as many deductions as possible, including a property manager whose monthly charges are deductible along with escrow.

Can I hold a mortgage and promissory note on a piece of property I formally owned and sold to a family relative (as well as a non-relative)? The answer is yes; provided, the mortgage is for the fair market value and the pay back on the mortgage must not have a balloon type structure nor exceed the holder’s life expectancy.

Once again, this type of asset will be considered income and will go against a person’s monthly income eligibility.

One method that is used to reduce a person’s countable assets is called a personal services contract. These type contracts are usually used to take a person’s cash holdings (e.g. savings account) down below the $2,000.00 threshold. The way it works is the elder person signs a contract with their child or other trusted person who will work in managing the care of the elder. Managing an elder’s care can include, making certain the elder is receiving the correct care, shopping for the elder, specking out new or better places for the elder to live, socializing with the elder and taking the elder to doctor visits, to name a few.

For this service the elder will pay the child or trusted person a fixed amount upfront. The amount is usually enough to exhaust the remaining elder’s countable assets or at least drop the elder’s countable assets below the $2,000.00 threshold. However, the amount that can be received will be based upon three major criteria and that is the remaining life expectancy of the elder, a reasonable hourly amount to be paid and the number of hours per week spent working for the elder. It is not as simple as just naming any amount.

Medicaid planning is tricky. If you are looking to preserve as much of an elder’s assets as is possible, seek out an organization or attorney who specializes in this area for help. Do not guess at this process or it could create a huge mess resulting in penalizing the elder person.

James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.

In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.

His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.

James W. Mallonee, P.A.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224

871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223

Related Articles

Back to top button