John and Mary Bell live in Jackson, Mississippi. They are now in their mid-70’s and they just celebrated their 50th anniversary. The Bells have been blessed with three wonderful children. One is a nurse, one is a school teacher, and their youngest child, Tim, is not able to work. Tim is now in his late 40’s and lives in a group home. He receives Social Security (SSI) of about $650 a month and his parents have always supplemented his income.
Mr. and Mrs. Bell lead a modest life style. Mr. Bell receives Social Security of about $900 per month and Mrs. Bell gets about $650 per month. In addition, he has a pension of $350 per month. They are able to live on this and continue to save about $250 per month. Like most of their generation, the Bells are excellent savers. In fact, they have accumulated a nice little nest egg. Their assets are as follows: Residence $60,000, 1998 Buick $2,500, Certificates of Deposit $50,000, Mr. Bell’s IRA $8,000, Savings bonds $22,000, Money market $20,000, Total Countable Assets $100,000.
Unfortunately, Mr. Bell recently had a stroke and won’t be able to come home. He moved to the nursing home right up the street. Mrs. Bell is satisfied with the care he is getting… but her worst fears are coming to pass. That’s because she can’t care for herself…her Parkinson’s Disease has progressed to the point where she can’t stay at home either… and now that she has joined her husband in the nursing home, who will care for their son, Tim? And most of all, Mrs. Bell is concerned about the money. Mrs. Bell frets over the fact that the nursing home will cost about $10,000 a month for both of them… and that doesn’t count the cost of the medication.
You have good news for the Bells. You explain to them that under the Federal and State laws, Tim is considered to be permanently and totally disabled. Since that is the case, the Bells can give all their assets to Tim… or to a trust for Tim’s benefit… without incurring any transfer penalties. In other words, normally with both spouses in the nursing home, they would pay the cost of the nursing home out of their funds until their assets were down to $6,000. Under this scenario, their $100,000 in liquid assets would last about ten months … and they would end up spending all of Tim’s inheritance.
Fortunately, the news is even better than that. Under the “transfer to a blind or disabled child” section of the Medicaid law, Mr. and Mrs. Bell can transfer all of their assets to their son with a disability and incur no penalty whatsoever. Thus, she and her husband can make a gift of the entire $100,000 and qualify for Medicaid right away! Because Tim is receiving public benefits, they would need to give Tim’s money to him in a special type of trust that would not disqualify him for public benefits. The Bell’s feel better knowing that their son, Tim, will be cared for and they have preserved their life savings. To learn more, click here.