December 23, 2018
Michigan Medicaid Half-Loaf Plan | Berry’s Bites
Chris Berry, Michigan Elder Law Attorney reviews how the Medicaid Crisis Planning strategy known as a “half-loaf” Plan works to protect half of your assets if you were to need long term care in a nursing home.
Hey, this is Chris Berry. Today we’re going to talk about the Medicaid Half-Loaf Plan. Medicaid is a governmental program that’ll pay for your nursing home costs. But to qualify for Medicaid, a single individual can only have $2,000 worth of countable assets. A married couple, they’re going to make you cut your assets in half. At most, you can keep $120,000.
Michigan Medicaid Half-Loaf Plan Transcript:
Hey, this is Chris Berry. Today we’re going to talk about the Medicaid Half-Loaf Plan. Medicaid is a governmental program that’ll pay for your nursing home costs. But to qualify for Medicaid, a single individual can only have $2,000 worth of countable assets. A married couple, they’re going to make you cut your assets in half. At most, you can keep $120,000.
So, you could just spend down your money until you run out of cash. Now, countable assets are basically everything other than a home, small cash value of life insurance, personal belongings, and a prepaid funeral. So you could just spend down your money. Or, you could engage in what’s called Medicaid Crisis Planning Strategies. And one of those Medicaid Crisis Planning Strategies is what’s called a Half-Loaf Plan. Think of it like a loaf of bread. Half of it would have go to the nursing home. The other half, we could protect.
Now, it’s kind of complicated in how to try to utilize this strategy. Basically, what we’re going to do is we’re going to gift half of the money away. This is going to create a divestment penalty. And so what Medicaid does is they look at how much you’ve gifted away, and they’re going to penalize you.
Basically, they take the amount that you’ve gifted away, and they divide that by the divestment divisor. Which, this year, is just over $8,000. So that amount that you’ve gifted away, they’re going to penalize you. So let’s say you’ve gifted away $80,000. They’re going to divide that by 8,000, and that equals 10. And that 10 represents the number of months that you need to go, while being below $2,000 worth of countable assets, before the state of Michigan is going to pay any benefits.
Now, the remaining assets … So let’s say you have 160,000. What we could do is we could gift away 80,000. That’s going to create a divestment penalty for 10 months. And then, the remaining 80,000 then you have, we could put it into a Medicaid Compliant Annuity, that pays back over 10 months. So the time that you have to private pay, during that divestment penalty, the annuity would pay for your nursing home care.
Thereby, we’ve protected $80,000 because we gifted it away, and cut the time that we’d qualify for Medicaid in half. A very simple explanation for something that’s very complicated. Hopefully, that helps. That’s that Medicaid Half-Loaf Crisis Planning Strategy.