Understanding how to protect your assets as you age is a critical component of estate planning. In addition to navigating estate taxes, beneficiaries, and who will be responsible for your medical decisions should you be unable to make them yourself, it is also critically important to look ahead and think about long-term care coverage as you or a loved one age. As part of your planning, make sure you learn about the MassHealth lien law so you can protect your estate.
MassHealth, the program that administers Medicaid in Massachusetts, is an option for helping to pay for extensive healthcare and long-term care expenses, but it is important to look ahead and plan in advance in order to maximize your benefits and protect your assets, especially your home.
MassHealth has strict income and asset limits on eligibility – but in most cases, your home doesn’t count against those limits. This is good news and bad news. On the plus side, it allows you to keep your home even if you need to transfer other assets in order to qualify. However, it does not prevent MassHealth from eventually tapping the value of your home to help recover the costs of paying for your care.
MassHealth Living Liens
One way that MassHealth recoups some of these costs is via lien laws. If you own a home and are approved for MassHealth benefits, MassHealth will place a lifetime lien on the property. MassHealth will later recover its contribution to your (or your loved one’s) care upon the sale of the property while you or they are alive, or from the estate upon their death. In short, even though MassHealth exempts the home from income limits, this does not mean that the home is protected from MassHealth.
Enter estate planning. Strategic planning can help ensure you or your loved ones qualify when you need MassHealth – and protect your home from the lien law at the same time. But it is ideal to begin planning well in advance.
For an individual applicant to be financially eligible for MassHealth, their assets must have been reduced below $2,000. In 2021, a married applicant, who has a spouse living in the community who does not need MassHealth coverage for long term care, the total assets of the couple must be below $132,380.
However, you can’t just liquidate your assets and gift cash to your family members and qualify. You will need to document how you reduced your assets. This process is called the five-year look back and is a critical component of estate planning.
During the MassHealth application process, MassHealth can request up to five years of financial records for all assets. This may include requests for additional information on large transactions, whether you sold your house for fair market value, and your patterns of deposits and withdrawals.
Advance Planning is Key
With advance planning, you can avoid a MassHealth living lien and appropriately spend down your assets to qualify for coverage. This requires you to begin the process well in advance of any need for long-term care.
For example, to avoid the lien law and/or estate recovery, you may choose to put your home in an irrevocable trust. In this case, because you will no longer own the home, it will not be subject to any claim by MassHealth. However, there will be a five-year wait for MassHealth nursing home coverage due to the transfer penalty.
It is never too early to begin thinking about how you might want to handle the eventuality of long-term care. Ideally, you begin the process early, consulting both your attorney and financial planner to put together the plan that makes sense for your family. There are many subtleties and exceptions to the laws and regulations, and consulting a team that can help you navigate it all will serve you well.
Our team is highly experienced – and works closely with our clients’ financial planners to put together customized, forward-looking estate plans. If you are interested in learning more, please contact our office today.
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Natick, MA 01760
Ladimer Law specializes in estate planning. We protect our clients, their heirs, and their assets by listening closely, knowing the law, and executing estate plans that fit and evolve.