Medicaid Planning & Long Term Care Strategies, When It's a Good Idea, and How It Works.
What is Medicaid Planning?
When a person finds themselves in need of long-term care, they are often floored by the cost of care services. Medicaid planning is a form of estate planning that allows you to retain some form of control over your assets and still qualify for Medicaid's insurance plans to cover the cost of your care.
Planning for Medicaid is an important legal planning service that should be considered for yourself or loved ones who are approaching an age where they may find themselves in need of assisted living, nursing homes, in home medical assistance, or other forms of long term care. It is crucial that you work with an attorney while planning for Medicaid as soon as you realize you may need long-term care, because advanced planning is the key to achieving your estate planning and asset goals. An attorney can serve as a helpful guide during this process and provide valuable insight.
Applying For Medicaid
Applying and qualifying for Medicaid's insurance plans is a complex and difficult process, riddled with lengthy guidelines and requirements, which can oftentimes cause undue stress and discomfort for loved ones. There are situations that can arise unexpectedly where you can be required to use your assets, including your home, and saved wealth to make payments towards assisted living or nursing home costs and find yourself unable to pass on an inheritance to your loved ones. An attorney who specializes in planning for Medicaid can be helpful in forming a plan to protect your wealth and assets from these types of situations.
Hiring a Medicaid Planning Attorney can be especially important for people who are planning on passing down their assets to their family or for their own future income, while still qualifying for Medicaid's insurance plans benefits. Because of Medicaid's five year look back period created by the Deficit Reduction Act of 2005, an applicant's eligibility for Medicaid's insurance plans can be delayed or jeopardized by improperly transferring assets to loved ones.
A qualified Medicaid planning lawyer can help guide you through Medicaid's complex system while helping you make strategies to maximize the preservation of your financial assets and estate for yourself and your family.
When Should You Consider Hiring an Attorney to Help With the Process?
A factor in determining if you should hire an attorney who specializes in Medicaid Planning is the total value of your assets, including your home. If you or your family can benefit financially from restructuring your financial assets using certain types of Legal Trusts (transferring your wealth into a trust), or by controlled gifting, then you will need the help of a Lawyer who specializes in Planning for Medicaid to help plan, structure, and execute the documents and agreements necessary to protect your assets prior to applying for the Medicaid's insurance plan benefits. Understanding the look back window can help you gauge if your total assets make it worth your while to engage in legal Medicaid Planning.
Even if you do not have assets that warrant complex trust planning, a qualified Medicaid Planning Lawyer can help you craft the best strategy through a combination of estate planning and rule-following that put you in the best position to pass along an inheritance to your loved ones while still qualifying for Medicaid when the times comes.
Do I Have to “Spend Down”?
If you own your home and have retirement savings, people often assume they are obligated to spend it all on long-term care instead of passing it down as an inheritance to their loved ones. This is not necessarily true.
First, there may be ways to spend your money short of private paying the nursing home that accomplishes some measure of savings for you and your family. The rules about how you can spend your money and still qualify for Medicaid are not so easy to understand. A qualified Medicaid Attorney can best guide you on the best way to spend excess assets.
Second, if you do careful advanced planning, you can avoid a spend down all together. But even if you can't do advanced planning, there are still some emergency planning tools that may help lessen the blow qualifying for Medicaid.
The Look Back Period
Medicaid's Look Back Period is a period of five years prior to applying for Medicaid in which any assets you have transferred for less than fair market value (to your family as a gift, for example) can make you ineligible for Medicaid Plans for a period of time. The penalty is assessed based on the amount of the gift and the total cost of long term care in the state where the assets were transferred.
In an ideal scenario, you would have anticipated your need for long-term Medicaid coverage, and stopped any gifting over $1,000.00 five years before you need care. But this level of anticipation is rare, and, frankly, difficult to accomplish. If you have given a big gift within the last five years and need to go to a nursing home, for example, all is not lost. An attorney who is knowledgeable about Medicaid rules can help you mitigate the gift.
Here is an example of how the look back period and a lack of advanced planning could spell disaster. Imagine an elderly person (without a spouse) who is suddenly and unexpectedly facing the need for long-term care due to a common cause such as, dementia, alzhiemers, or stroke. The person has no spouse and owns a home which has a value of $250,000 and has a retirement savings of $150,000 placing their total assets value at $400,000. The average cost of long term care in the US varies from around $3600 a month ($43,200 a year) for assisted living to $7,700 a month ($92,400 a year) for nursing home care and can be much higher than that in some areas.
In this example if the person needing to transfer into a long-term care facility transfers their home and their money to their loved ones at the last minute, the homeowner would not be eligible for Medicaid coverage for up to 51 months at best ($400,000k divided by $7,700 monthly cost) and would have no way to cover their long-term care expenses. This is a worst-case scenario. If, however, the homeowner could utilize a Medicaid Planning Lawyer before they enter a nursing home and either transfers the house and some money into trust, or transfers the house through the use of a Life Estate, when the need arises, they can immediately qualify for Medicaid coverage while passing on a legacy to their family and increase their overall quality of life.
How Can an Attorney Help Protect My Assets?
Lawyers who specialize in Medicaid Planning have a strong understanding of the complexities of the Medicaid Law, Elder Law, both State and Federal, as well as the best legal methods, tools, and devices used to preserve wealth and provide the most benefits to their clients and their clients families. They also have experience dealing with different scenarios and helping clients make the best plans based on their personal circumstances. Different planning strategies are utilized based on whether the client is currently needing to apply or planning for the future. It is desirable and advantageous to work with a lawyer who specializes in planning for Medicaid in advance of a need for long-term care to get the best results, but even when the client is in need of immediately applying to Medicaid, an attorney who specializes in planning for Medicaid can help you get more favorable financial outcomes for you and your family, and help prevent hang ups in the Application process.
Understanding Tools Commonly Utilized in The Estate Planning Process.
Types of Trust Used
Asset Protection Trust
Asset Protection Trusts can be utilized in planning for Medicaid to pass on their wealth to loved ones, helping reduce the taxation from the inheritance, and protecting it from their own personal debt or liabilities. A person who allows their assets into an Asset Protection Trust no longer owns the assets, but can still reserve the right to live in their home, and can still receive income from income producing assets transferred into the trust. This type of trust allows you to maintain best control over the assets in the trust than if they were to be directly gifted to a family member but some or all assets in this trust are still subject to medicaid's look back window.
Income Trusts
Income Trusts are utilized by a Medicaid Planner to handle income that a person applying for Medicaid is receiving from their assets. Medicaid's rules have strict limits on the amount of income you can receive directly. Attorneys specializing in helping clients plan for Medicaid Plans use Qualified Income Trusts, also known as Miller's Trusts, as a type of account where excess income is transferred into which can be distributed by a trustee for “qualifying expenses”
Annuities
Annuities and Promissory Notes Compliant with Medicaid
There are other tools, such as Annuities, Deeds, and Promissory Notes that a qualified Medicaid Planning Attorney may suggest if they fit within your specific needs.
About Jelks Law Medicaid Planning Services
Our lead Medicaid Planning Attorney, Leslie A. Starritt, brings seven years of estate planning, elder law, and Medicaid planning experience to the firm.
As part of her practice, Leslie has cultivated the patience and skills necessary to help people transition from independent living to nursing homes and assisted living centers. This includes an ability to preserve assets and apply for long-term disability coverage through Medicaid in a streamlined and efficient manner. Read Leslie A. Starritt's full bio here.