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July 3, 2008
AFFORDABLE ASSISTED LIVING
Over the years my practice has dealt primarily with helping families who have to place a loved one in a nursing home. Recently, a friend of mine, Ron Hennan, was hospitalized, and then placed in a nursing home. Ron is a familiar face in town, being a former Saugus DPW worker and a regular at the Tumble Inn. Although he has a bit of difficulty getting around, his mind is still sharp and doesn’t really need skilled nursing care. His doctor stated that Ron should not be living alone. So, the search began for an assisted living that would accept someone who has very little savings and not that much income.
What is assisted living? Assisted living is apartment living with meals provided and extra help, if you need it. It is independent living but provides assistance to those who need help with eating, bathing, medication management, dressing, laundry and housekeeping. Generally, you pay a monthly rent plus additional money depending on how much help you need each day.
How much does assisted living cost? Prices vary depending on location and the size of the unit you are renting. In eastern Massachusetts you could expect to pay around $4,000 per month for a studio apartment. Although this seems high, you must realize that meals are included as well as utilities, laundry, social and recreational events and 24 hour security. For seniors stranded alone at their home, the social aspect of just being able to go down stairs and interact with other residents can make a world of difference in their life.
Is assisted living tax deductible? Not everyone can deduct assisted living expenses as a tax deduction. However, if you are at an assisted living facility because you are unable to live by yourself and you need assistance with at least two activities of daily living (ADL) or are cognitively impaired (a fancy term for those with memory problems), you may deduct the entire cost of the assisted living as a medical expense. From a tax point of view, these people are considered chronically ill, and all of their expenses relating to the place where they live become medical tax deductions. Yes, even your cable bill becomes a medical expense.
Because the cost of assisted living is so expensive, and the need among seniors for a safe place to live is so important, several options have been developed to help seniors who need help, but are not so sick that they require skilled nursing home care. The four programs that I have found to help seniors afford assisted living are, the PACE program, the Group Adult Foster Care Program (GAFC), Veterans Aid & Attendance, and the Low Income Tax Credit Program. There are different asset limits and income limits to be eligible for any of these programs. This week I’ll talk about the Group Adult Foster Care Program and in two weeks I’ll summarize the benefits of the remainder of them.
Not all assisted living facilities accept the Group Adult Foster Care Program (GAFC) as a way of making living at the facility affordable. You need to ask them if they participate in the GAFC program and how long of a wait there will be for a unit to become available. Many facilities have a few GAFC units that they try and use for current residents who have spent all of their money on assisted living to transition them into the GAFC slots. This means it’s harder to go directly into a GAFC room from the outside.
To qualify for the GAFC program, you income must be low, very low. This year the annual income limit is $1,111 per month. If you earn just $1 more than that, you don’t qualify. There is also an asset limit of $2,000 to qualify. The PACE program that I will discuss in 2 weeks has a more generous income level of $1,911 per month, but the same $2,000 asset limit.
If your income is less than $1,111 per month, the first step is to apply for supplemental social security (SSI). By applying for SSI, you will receive social security benefits so that your total monthly income will be brought up to $1,111. When you apply and qualify for SSI, you will automatically be enrolled in MassHealth for all of your medical needs as well as qualify for the GAFC program. Now you just need to find an assisted living facility that has a GAFC opening. This may take a while.
One common problem for seniors attempting to qualify for the GAFC program is that they have more than $2,000. This means that they are not eligible for SSI or MassHealth. One answer is to pay the assisted living facility the full amount of the rent each month and hope that, when you run out of money, a GAFC unit will be available. If you are lucky enough to find a GAFC eligible unit and have more than $2,000, some planning can help.
PLANNING TIP #1 – Let’s say that your income is below $1,111 but you have about $10,000 in the bank. The rules say that you must have less than $2,000, so this is what you can do; Establish a prepaid funeral and create a burial account. A prepaid funeral is just what it says, you go to a funeral home and pick out the items that you want and pay now, for your funeral to take place in the future. A burial account is a special bank account that can be funded with a maximum of $1,500 and can be used to pay for incidental funeral expenses that are not included in the prepaid funeral plan. Both of these are allowable spend down items in the event you ever need MassHealth for long term care at a nursing home.
PLANNING TIP #2 – Let’s say that your income is below $1,111 but you have a more substantial amount of assets, say $100,000, and you are in an assisted living facility that has a GAFC room available. If you were to transfer $99,000 out of your name, you would now have less than $2,000, the maximum to be eligible for MassHealth. The important distinction to understand is that there is no transfer of asset penalty for what we refer to as, Community MassHealth. Community MassHealth is for anyone, as long as they are not in a nursing home. If this person later enters a skilled nursing home, the $99,000 transfer would be considered a disqualifying transfer with the possibility that the funds would have to be returned and paid over to the nursing home. If you use this method of qualifying for Community MassHealth you should see competent legal advice.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org