Medicaid is a means-tested government program that can pay for the long-term medical care of elderly and disabled individuals. In Arizona, Medicaid is administered by the Arizona Long-Tern Care System, or ALTCS for short.
Because Medicaid is means-tested, a Medicaid applicant must meet certain types of eligibility requirements in order to qualify for Medicaid, which are as follows:
- Medical Eligibility
- Income Eligibility
- Resource Eligibility
The medical eligibility requirements are often not an issue for people who need long-term care, however, the income and resource requirements can be problematic for many applicants, especially if they would like to protect those assets from long-term care costs.
The income limit for ALTCS in 2016 is $2,199 for one ALTCS applicant or $4,398 for a married couple applying for ALTCS.
it is important to note that if only one person from a married couple requires ALTCS coverage, the non-ALTCS applicant may keep all of his/her, i.e. the non-applicant's, income without affecting the eligibility of the ALTCS applicant.
The resource limit for ALTCS in 2016 is $2,000 for each ALTCS applicant. If an ALTCS applicant is married, a spouse who is not also an ALTCS applicant or ALTCS member may retain up to $119,220 of assets, called the Community Spouse Resource Deduction.
By default, all of a person's assets are countable resources unless they are either specifically exempt or unless Medicaid law simply doesn't consider the Medicaid applicant's interest in those assets to be countable.
1. Exempt Resources
The following are some types of exempt assets:
- One home
- One car
- Burial plots
- Burial plans
- Life insurance
Although this list is not exhaustive, it does set forth most types of exempt assets.
2. Non-Countable Resources
Many types of trusts are expressly not countable as resources for purposes of Medicaid, however, most of these trusts require that the State of Arizona be a remainder beneficiary of the trust after the trust settlor passes away, among many other requirements.
But many people want to qualify for Arizona Medicaid or ALTCS while also not naming the State of Arizona as a remainder beneficiary in order to protect their assets.
Some trusts, however, are both: 1) not countable as resources and 2) do not require the State of Arizona to be a remainder beneficiary. But there is one major wrinkle, which we'll get to later.
In order for a trust not to be considered a countable resource while also not naming the State of Arizona as a remainder beneficiary, the trust must meet certain criteria, some of which are as follows:
The trust must be irrevocable and distributions cannot be made from the trust principle to or for the benefit of the Medicaid applicant. However, Medicaid does not count a right to income from the trust as a countable resource, though income actually received would likely be countable as income for purposes of income eligibility.
It's important to note that such a trust does not by its terms protect the assets of the trust from creditors of the trust grantor inasmuch as the grantor retains rights in the trust, rather, it simply makes the trust a non-countable resource for purposes of Medicaid or ALTCS eligibility.
Here's the wrinkle.
Transfers of assets, for little or no consideration, to a trust that is not countable as a resource while also protecting assets, can make a person ineligible for ALTCS
Arizona Medicaid or ALTCS is required to look for any transfers to such a trust within a 60-month period before the date a person applies for ALTCS. Further, if transfers for little or no consideration are found during such a period, such transfers generally result in a penalty period during which ALTCS will not pay for the long-term care costs of such person.
This brief overview of some important considerations associated with ALTCS eligibility is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.
Steve Cook is a estate planning lawyer at Cook & Cook. Although his main office is located in Mesa, Arizona, he represents clients throughout the Phoenix, Arizona Metropolitan area including the following east valley cities: Scottsdale, Paradise Valley, Tempe, Chandler, & Gilbert.