This document was last revised on March 2, 2004, and does not reflect changes in the law that have occurred since that date. The purpose of this outline is to provide an overview of concepts germane to the subject. None of the information contained herein should be relied upon without careful analysis of the changes to the applicable laws and regulations since the revision date.

 

I.          Medicaid

 

A.        Eligibility.  Eligibility is based on available resources (assets) and income.  Basically, all assets and income must be used to pay for nursing home care other than certain exempt assets.  The following is a list of the most common exemptions:

 

1.         General - Assets totaling $1,600.00.

 

2.         Funeral Contract - Irrevocable funeral contract up to $5,400.00 or revocable funeral contract up to $1,200.00.

 

3.         Burial Plot - Burial plot and headstone or marker.

 

4.         Automobile - Automobile having a value of $4,500.00 or less.

 

5.         Life Insurance - Cash value life insurance with a face value of $1,500.00 or less.

 

B.         Community Spouse.  The following assets are protected if the institutionalized individual is married to a spouse who is living in the community, i.e. the community spouse:

 

1.         Home - A couple’s home is exempt if the community spouse is living in the home.

 

2.         Funeral Contract - Community spouse may own an irrevocable funeral contract up to $5,400.00 or revocable funeral contract up to $1,200.00.

 

3.         Burial Plot - Burial plot and headstone or marker for community spouse and each member of the immediate family.

 

4.         Automobile - Community spouse can own one (1) automobile of any value in lieu of the institutionalized spouse’s automobile exemption (see Section 1.A.4 above).

 

5.         Community Spouse Protected Amount (CSPA) - Community spouse can retain one-half of the couple’s total non-exempt assets, as of the date of institutionalization of the spouse.  Currently, the minimum CSPA is $18,552.00 and the maximum CSPA is $92,760.00.

 

6.         Minimum Monthly Needs Allowance (MMNA)

 

a.         General - Community spouse is entitled to a minimum amount of income each month, based on shelter costs.  Currently, the minimum MMNA is $1,515.00 and the maximum MMNA is $2,319.00.  MMNA can be increased beyond the maximum of $2,319.00 if the community spouse can demonstrate exceptional circumstances at a Department of Social Services Fair Hearing.

 

b.         Income Diversion from Institutionalized Spouse to Community Spouse - In the event that the community spouse’s monthly income (Social Security, pension, interest from the Community Spouse Protected Amount) is less than the Minimum Monthly Needs Allowance, a portion of the institutionalized spouse’s monthly income may be diverted to the community spouse in order to meet the Minimum Monthly Needs Allowance.  This income diversion must be approved through a fair hearing at the Department of Social Services.

 

c.         Increase in Community Spouse Protected Amount - In the event that diverting the institutionalized monthly income still does not allow the community spouse to reach the Minimum Monthly Needs Allowance, the community spouse may be able to retain assets in excess of the Community Spouse Protected Amount ($92,760.00) to generate additional income in order to meet the Minimum Monthly Needs Allowance.  This increase must be approved through a fair hearing at the Department of Social Services.

 

 

NOTE: Historically, the Department of Social Services has increased the Community Spouse Protected Amount to include all of a couple’s assets prior to diverting income from the institutionalized spouse (known as the “asset first approach”).  However, recently the Department of Social Services has begun applying an income first approach in all cases.

 

C.        Transfers of Assets.

 

1.        The Look Back Period

 

a.         36 month look back period-  Applicable to outright transfers.  Look back period starts 36 months prior to the date that the institutionalized individual applies for Medicaid.

 

b.         60 month look back period- Applicable to transfers in trust.  Again, the look back period starts 60 months prior to the date that the institutionalized individual applies for Medicaid.

 

2.         Penalty Period.  A period of ineligibility for Title XIX benefits is calculated by dividing the uncompensated value of the asset transferred during the look back period by the average monthly cost of nursing home care, as determined by the Department of Social Services; currently $7,417.00.  The penalty period commences on the first day of the month during which the gift was made.  Example - Gift of $74,170.00 on July 15, 2003 results in a ten (10) month penalty period ($74,170.00 / $7,417.00 = 10 months), commencing July 1, 2003 and expiring on April 30, 2004.

 

NOTE: The State of Connecticut has requested a waiver that would change the commencement of the penalty period from the first day of the month in which the gift was made to the date (after institutionalization) on which the applicant would otherwise be eligible for Title XIX benefits. 

 

D.        Tax Consequences. Be mindful of the tax consequences of all transfers: 

 

1.         Connecticut Gift Tax.

 

 a.        Legislation passed in 2000 increased the amount exempt from the Connecticut Gift Tax over a six year period.  These exemption amounts were subsequently amended, pursuant to legislation enacted in 2002 and 2003.

Calendar Year   of Gift	Exemption Amount   2000 Law	Exemption Amount   2002 Law
2001	$25,000	$25,000
2002	$50,000	$25,000
2003	$75,000	$25,000
2004	$100,000	$25,000
2005	$950,000	$25,000
2006	$1,000,000	$50,000
2007	$1,000,000	$75,000
2008	$1,000,000	$100,000
2009	$1,000,000	$950,000
2010	$1,000,000	$1,000,000

 

b.         In addition to the exemption amounts listed above, the Federal annual gift tax exclusion of $11,000.00 per person continues to apply to present interest gifts.  For example, no Connecticut gift tax will be due on a present interest gift of $36,000.00 to one person in year 2004.

 

c.         Rate of tax ranges from 1% to 6% on gifts in excess of exemption amount.  Connecticut gift tax will continue to apply beyond 2010 for gifts of more than $1.0 million.

 

d.         Tax is paid by the person making the gift by the due date of the return (April 15th following year gift is made).

 

2.         Carry Over Basis of Gifted Assets.  Assets that are gifted during life do not receive a step-up in basis at death of the donor.

 

3.         Loss of Exemption on Sale of Principal Residence.  Recipient of transfer of real estate will lose $250,000 capital gain exemption ($500,000 if married) on a subsequent sale, if the real estate is not the recipient’s principal residence.

 

E.         Planning.  The current uncertainty in the law, including Connecticut’s request for a waiver regarding the commencement of the penalty period and the Department of Social Services recent income first approach, make Title XIX planning more difficult then in the past.  However, an individual must still consider several factors when planning for long term care, including:

 

1.         Maximizing retention of exempt assets; including, but not limited to, purchasing prepaid funeral contracts, paying off mortgages and/or equity lines on exempt real estate, making repairs to the home, or buying a new automobile.

 

2.         Long term care insurance.

 

3.         Gifting when appropriate.