New York Estate Planning & Elder Law Blog
The Michigan Supreme Court recently decided the case of Hegadorn v. Dept. of Human Services, which involves the Medicaid spend down process.
A “spend down” in this context refers to the process of reducing the assets of a person applying for Medicaid so the individual qualifies for Title XIX Medicaid coverage. Spend down also refers to reducing a Medicaid applicant’s monthly income so a person’s income makes them eligible for Medicaid.
How the Three Cases in Hegadorn Arose
The Hegadorn case involved three elderly women who receive long-term care in a nursing home. These women had begun receiving long term care at nursing homes at their own costs. Several months into staying the facility, each woman’s husband created an irrevocable trust that was for their own benefit.
Each married couple then transferred a majority of their individual and marital property to each trust. Distributions from each trust were then made to the husbands, who did not live in a nursing home. The distribution scheduled required that each payment be made at a rate that would deplete the trust within the husband’s expected lifetime.
Shortly after each woman’s trust was created, each wife applied for Medicaid benefits.
The Outcome of the Hegadorn Case
During the Medicaid review process for each woman, the Department of Health and Human Services determined that each spouse did not show the requisite need because the value of the assets in the trust placed each woman’s above the qualifying limits. As a result, each woman was denied Medicaid benefits. Each women then unsuccessfully appealed the Department’s denial. During the appeal process, the three cases were consolidated into one.
The Michigan Supreme Court then heard the case and determined that the Court of Appeals had applied an incorrect interpretation of federal laws which led to the denial of benefits. Instead of ordering that the decision for each Medicaid application be abandoned and that each application be reviewed against by the Department to determine if each woman qualified for Medicaid benefits.
Deciding if You Are an Applicant for Medicaid
All applicants for Medicaid coverage with assets in excess of $1,600 are candidates for spend down. Spend downs often have the greatest advantage for couples when only one spouse needs nursing home care. The goal of a spend down is to leave the applicant’s spouse in the best financial situation possible. Sometimes people decide to spend all of their money on medical and nursing home bills.
Unfortunately, revocable trusts are not able to shield assets from being counted towards a Medicaid application. Properly created irrevocable trusts, however, can be used to protect assets. While it is possible to perform your own spend down, proceeding on your own can create a number of complications.
As a result, many people decide on the assistance of an experienced estate planning attorney to help navigate this process.
Speak with an Experienced Estate Planning Attorney
If you or your loved one has questions about the Medicaid spend down process or any other element of estate planning, you should not hesitate to speak with an experienced attorney. Contact Ettinger Estate Planning today for assistance.