senior coupe with elder law attorney in Howell, MIWe are publishing this information for clients and friends of our law firm to give you an important update about how the State of Michigan recently started applying a Medicaid planning policy.  Although this may not directly affect you, you should be aware of it and how it affects your estate plan, your family and your other loved ones.

You may have recently seen an interesting article by Mike Lammi in the Press & Argus titled “Change Could Affect Medicaid for Nursing Home Residents”.  If not, you can click here to read it.  We have received dozens of calls and emails from clients and people in the senior services industry who are concerned about whether the change identified in the article will affect them.  This update is intended to summarize the change, let you know whether the change may affect you, and give you some peace of mind that the “sky is not falling” when you need to deal with Medicaid or long-term care planning.  There are still plenty of great planning options.

Let’s take this in three steps.  First, what was the change made by the State of Michigan?  Second, who does it affect?  And third, what are your options when it comes to Medicaid and other long-term care planning?

What was the change?

Here is a little history to help you understand the issue.  About 18 years ago, the Department of Human Services (DHS) started permitting the use of what is known as a “solely for the benefit of trust” (SBO Trust) to allow assets to be protected for the spouse of a nursing home resident.  So, for example, if a husband was entering the nursing home, we could take either the husband’s or the wife’s assets and move them to an SBO Trust and protect them for the wife’s use.

In August this year, without notice to the public or elder law attorneys, DHS stopped allowing SBO Trusts.  There was no change in the Medicaid law.  There was no change in the Medicaid policy or rules.  DHS is saying that this is a change in how they are applying policy.  In other words, they are saying they have been doing it wrong for the last 18 years.

The SBO Trust is one small area of Medicaid planning, long-term care planning and elder law.  The change only affects planning with SBO Trusts.

Who does the change affect?

Here is a list of those affected and not affected:

  • The change affects married couples only who may seek Medicaid to pay for nursing home care.  It does not affect single people.
  • The change affects “crisis” planning only.  This means it affects married couples who are seeking to apply for Medicaid and one spouse is already in the nursing home or will be in the near future.  It does not affect pre-planning for asset protection (that is, planning ahead of Medicaid’s five-year lookback period).
  • An open and very important question is whether DHS will apply the change retroactively to Medicaid applications that were already approved.  In other words, will all SBO Trusts created over the past 18 years be “shot down” by DHS?  The practical effect of this would be to deny thousands of Medicaid applicants who had already been approved, create thousands of appeals, and otherwise create a mess in the system.  I don’t believe this will happen, and to date we have not seen any of our annual redeterminations denied for this issue.  So, the short answer – at least right now – is that those who used an SBO Trust in the past and were approved will not be affected.

What are your remaining planning options?

To me, this is the critical question.  We can yell that the sky is falling and take the doom and gloom approach.  But that’s not how we operate.  We want to make sure that you understand what you can do to protect your life savings, not what you can’t do.  Here is a short summary of the wonderful planning techniques available if you or your loved ones need nursing home care or other long-term care:

  • Planning for single people:  If you are single, you can use certain gifting and spend-down strategies that will allow you to qualify for Medicaid.  We can generally save between 60% and 75% of a single person’s assets (sometimes more) and get them qualified for Medicaid.
  • Planning for married couples:  If you are married, there are still great strategies available to protect 100% of your assets and apply for Medicaid.  I will say it again so there is no misunderstanding.  The healthy spouse outside the nursing home can protect 100% of his or her assets and the spouse in the nursing home can qualify for Medicaid.
  • Veterans’ Benefits Short of the nursing home (for example, home care or assisted living), there are benefits available to “wartime Veterans” who served in World War II, the Korean War, the Vietnam War and certain other periods.  Benefits are also available to surviving spouses of wartime Veterans who need help at home or in an assisted living community.  These are terrific benefits to add to the income of a Veteran or surviving spouse who needs care.  The amounts are up to $2,085 per month for a married Veteran, $1,785 per month for a single Veteran and $1,130 per month for the surviving spouse of a Veteran.  These benefits are income tax free, for life.
  • Long-Term Care Insurance This may be a good fit for some.  The two main problems I hear from my clients about long-term care insurance are: (1) “it’s really expensive and the premiums keep going up as I get older”; and (2) “if I pay premiums for all those years and never use the insurance, I’ve wasted my money.”  With those problems in mind, it makes sense to look at long-term care, especially with some relatively new hybrid products out there.  These hybrid products are a combination of life insurance and long-term care.  If you need the benefits for long-term care, you can use them.  If not, the insurance pays a death benefit to your beneficiaries (spouse, kids, etc.).  The best thing – the premiums never increase.  That is because it’s a life insurance policy with long-term care benefits.  Once the policy is paid for, there are no more premiums.

DHS’s Medicaid decision has created a wave of alarm and fear that is not warranted.  Mark Twain once said “The reports of my death have been greatly exaggerated.”  I would say the same thing about those that are talking about “the death of Medicaid planning and long-term care”.  It is not dead, it is alive and thriving.

DHS’s decision is now being appealed on many levels with many different law firms in many different forums.  We will keep you posted as these appeals move forward, so stay tuned and we will make sure you have the most recent information as it comes out.

In the meantime, I want you to understand that Medicaid and long-term care planning options are still available and, as always, we are here to help if the need arises.  We would welcome any questions or comments on this topic.



Glenn R. Matecun

Matecun, Thomas & Olson, PLC

[email protected]

Livingston County Office:  (517) 548-7400

Macomb County Office: (586) 751-0779

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