Division of Assets at a Glance
“I am going to lose everything I have to pay for Long Term Care!” I hear this so often when meeting with residents and family members for the first time. It can overwhelming, but I reassure them that armed with some knowledge and my assistance, we will work through it together. Having gone down this path with my own parents, I understand the emotions, concerns & the questions that start flooding you. Some people are financially able to pay privately for Long Term Care (LTC) at least for a while, but the vast majority of elderly will at some point, look to Medicaid for assistance. Regardless of your financial status, if one spouse is remaining at home and the other one requires LTC, the first step to figuring it all out is the same for everyone – Division of Assets.
Division of Assets – Friend or Foe? Division of Assets is your FRIEND! It is designed to preserve your assets at their peak, so that the spouse at home does not become impoverished while paying for LTC for an institutionalized spouse. It WILL keep you from “losing everything.” In a very general nutshell; it’s reporting your assets to Division of Family Services (DFS) in order for 50% of your assets to be preserved or aside for the spouse remaining at home. Those preserved funds never have to be spent on LTC for a spouse in a nursing home – and it’s all legal YAH! In fact, it is the required 1st step by Division of Family Services if at some point, you will be looking to Medicaid to assist you with paying for LTC for your spouse. The most IMPORTANT part about completing a Division of Assets is do it when you FIRST start paying for LTC for a spouse – when you have the greatest amount of assets. Say you have $50,000 in assets. The process would set aside $25,000 of assets for the spouse at home that is basically untouchable and the remaining $25,000 would be required to be spent on care for the institutionalized spouse before they would be eligible to apply for Medicaid. If you wait 3 months to do a Division of Assets after you’ve already spent $15,000 for LTC for a spouse, you now only have $35.000 to divide in half. The spouse at home now only has $18,000 to preserve instead of $25,000. Completing a Division of Assets does not obligate you to apply for Medicaid. I does put you in the best financial position if and when you do and it lawfully protect the assets of the spouse at home.
Will I Lose My Home? Elderly couples sometimes balk at completing a Division of Assets with DFS for future assistance with Medicaid, in fear that they will lose their home leaving one spouse homeless. This is one of the most common misconceptions. Even though you are required to report your home’s value as an asset, its value is not included in your asset total for the purpose of dividing and preserving that 50% for the spouse at home – and that’s FABULOUS! The spouse at home can rest assured that their home will be intact while both couples are still living. Once both couples are deceased, Medicaid does have the right to recuperate any Medicaid monies they have paid for LTC for an institutionalized spouse from the sale of the home.
What Other Things Are Considered Assets? Basically, if you own it – you report it. But just because you own it doesn’t mean it counts in your asset total. Being very transparent with completing a Division of Assets will only make the process go smoother and quicker. DFS will always be able to discover what you don’t report and it will only slow down the process. Generally, these things items are counted in your asset total for the purpose of dividing or preserving funds. While it is not a complete listing, if you can liquidate it – it probably counts: Stocks, Bonds, IRA’s, CD’s, Savings, Checking, Collectibles (antiques cars, priceless jewelry collections, etc.), Recreational Vehicles (boats, RV’s, trailers, etc.). Farm Machinery or Equipment (not in use.) While you must report all your vehicles, one personal use vehicle, is exempt from the asset total. One of the most overlooked assets that can cause a hiccup, is Life Insurance policies. Whole Life Insurance policies do not count toward your asset total as their in no cash surrender value – but you still have to report it. If you have a Life Insurance policy with a cash surrender value, the current surrender value is included in the asset total. HOWEVER – there is a work around. You have the option of “assigning” your cash surrender Life Insurance policy over to a funeral home of your choice. The benefits of the policy would be paid to the funeral home upon death for funeral expenses and not to current beneficiary. Your funeral home can work with your Life Insurance Company to complete the necessary paperwork. The funeral home will provide you with an Irrevocable Policy that will exempt the cash surrender value from your asset total. You to have this done BEFORE you complete the Division of Assets in order for it to be exempt and it is generally a simple process. There are limits on the size of a “cash surrender” for the work around. If you are tempted to “give away” assets in order to lower you asset total, keep in mind that there is a 5 year “look back” period for any large monetary gifts or assets you’ve given away.
Wrapping It All Up. For most people the Division of Assets process is not as daunting as it appears. The form itself is only 3 pages long. You will need to gather your documents, but once done, you’re already 80% there if and when you need to apply for Medicaid. If you have considerable assets, I recommend that you enlist the services of a Medicaid lawyer to capture all your assets correctly. Their fees will count as an expense for care of an institutionalized spouse. For the majority of my resident and families, I can assist them with the process without hiccups. The information I have provided is broad spectrum and there are always an exclusion to the rule somewhere. I always advise my families to contact their local Division of Family Services office for “official” answers to their questions.
Business Office Manager
Marshfield Care Center