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Paying for Assisted Living

David Silver teaches The Legal Environment of Business in ECU's Department of Finance. Dave is also a Partner with The Graham.Nuckolls.Conner Law Firm in Greenville, NC, concentrating in Elder Law

Mom is getting weaker, she is okay as long as we are there to fix her meals and make sure she takes her medication, but we can't be there all the time. Dad's dementia is so severe that we are worried that he might hurt mom. Our aunt never leaves the house and can't be left alone at night because she might fall. These are all common issues that confront the elderly or those caring for elderly loved ones. While we would all want to stay in our own homes for as long as possible, there comes a point where some people need the protective and social environment of an Assisted Living facility.

North Carolina has two levels of nursing care: Assisted Living and Skilled Nursing. Skilled Nursing is the "Nursing Home" where the person requires care from a nurse, it is rarely voluntary. Assisted Living is the "rest home" that takes care of (usually elderly) people who don't need a nurse, but do require help with some of their activities of daily living (nutrition, hygiene, medications, etc.). Some Assisted Living facilities also provide a memory care unit that is equipped to take care of people suffering from Alzheimer's or dementia.

The cost of Assisted Living facilities varies widely depending upon the services needed, the amenities, etc., but a decent estimate of the cost in eastern North Carolina is between $2,000 and $5,000 per month. If the elder person has a good pension, significant assets, or a decent long-term-care insurance policy, then the cost should not be an issue. However, if the elder's monthly income and available assets are insufficient, then there are a couple of public resources to help pay for this type of care. If the elder is a war-time veteran or the veteran's widow/widower, then the elder might be eligible for a benefit through the Veterans' Administration called Aid and Attendance. This benefit could be for as much as $2,000 per month and was a topic of a previous article. In addition, North Carolina has a program called Special Assistance that helps cover the difference between the elder's income and the cost of the Assisted Living facility. It is important to realize that not all Assisted Living facilities accept Special Assistance.

Special Assistance helps pay for care at participating Assisted Living facilities like Medicaid helps pay for care at Skilled Nursing facilities. The eligibility rules between these two programs are similar, but there are some significant differences. Similar to Medicaid, in order for people 65 year old or older to qualify for Special Assistance, they must meet a medical test, an income test and an asset test. The medical test simply requires a doctor to fill out a form (called an FL-2 form) stating that the person requires adult care home level of care. The income test requires that income (not including spouse's income) be less than $1,227.50 per month, or $1,560.50 per month for care in the memory care unit.

The final qualification test is the asset test. An applicant may not have more than $2,000 of "countable" assets. Unlike Medicaid, Special Assistance does not count assets owned by a spouse, but any other countable assets would have to be "spent down." A residence and one vehicle are usually not countable assets, meaning that they do not have to be sold in order to qualify for Special Assistance. Cash, retirement accounts and investments usually are countable assets, meaning that these funds would have to be spent down. It is usually okay to spend down countable assets by pre-paying for a funeral, paying legitimate debts and paying for health care. There are many rules about what constitutes a "countable" asset and what is permissible when "spending down" assets, therefore it is often worthwhile to consult with an attorney specializing in this area of law to discuss what can be done, and to make sure that nothing is done that might jeopardize future eligibility for Medicaid should Skilled Nursing Care ever be needed.

While gifts can be made to a spouse or disabled child, assets can't otherwise be given away in order to qualify for Special Assistance. If assets have been given away or transferred for less than full value within three years of applying for Special Assistance, you will be ineligible for Special Assistance for one month for every $2,000 that you have transferred, beginning from the date of the transfer. The rules relating to gifting penalties for Special Assistance are different than the rules for Medicaid. There are times when gifting assets might be appropriate, and there are ways to fix the damage done by past gifts, but the details of these circumstances would require individual legal analysis beyond the scope of this article.

Medicaid pays a part of the Special Assistance benefits every month, and Medicaid will have a claim against the estate at death for the amount that Medicaid paid as part of the Special Assistance. If you don't have anything in your estate when you die, then this claim is of no consequence. However, if you had some non-countable assets when you applied for Special Assistance (such as your residence) and these assets are part of your estate when you die, then these assets may have to be sold in order to pay Medicaid's claim (this is a process called "estate recovery"). There are sometimes opportunities to protect some assets from estate recovery. If it is important to you to try and ensure that your residence is protected for your kids at your death, then it is usually beneficial to discuss estate recovery with an attorney practicing in elder law.

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