BUT WON’T MEDICAID TAKE MY MONEY

A lot of people believe that if they require long term care, Medicaid will take their money. “Can I save my money from Medicaid?” They’ll ask. “I don’t want Medicaid taking all of my money.”

The truth is, Medicaid doesn’t take a person’s money, unless they’re enforcing a “Medicaid lien,” a concept that is outside the scope of this article. An individual can be ineligible for Medicaid for various reason. If they are ineligible, they will have to find a source of payment for their long-term care other than Medicaid.

For most people, this means that they must private pay for their care. Since long term care can cost upwards of $72,000 per year, people simply cannot afford to private pay for very long.

So, the answer I give my clients – who are quite often distraught over the prospect of paying for their care – is “No, Medicaid won’t take your money. And, yes, we can save your money and qualify you for the Medicaid program.” We won’t be able to save it all, but we will be able to save a surprising amount of your money. I then tell them the facts.

In order to qualify for Medicaid, a person can have no more than $2,000 in countable assets. Before you think you’ll never qualify for Medicaid, since you’re worth much more than $2,000, realize that “countable assets” do not include such items as a home, a car, personal goods and household effects, a prepaid funeral expense, and certain policies of life insurance. These assets are what is known as “excluded resources,” and for the most part, a person can retain these valuable items and still qualify for Medicaid.

If one spouse requires long term care and the other does not, the spouse that does not require care may retain up to $87,000 in countable assets. So, before we’ve even begun to plan for Medicaid, we have a couple that has retained up to $89,000 of countable assets, their home, a car, and their personal goods and household effects.

Then comes the plan. There are a number of planning techniques that fall under the concept of “Medicaid planning.” But the basic concepts behind these techniques can be categorized into a few broad areas.

One area is conversion: converting countable assets into non-countable assets. For instance, establishing a prepaid funeral trust with cash. Cash is a countable asset that has the potential of disqualifying an applicant for Medicaid. A prepaid funeral trust is an excluded resource, which does not disqualify an individual for the program.

Another category of planning is called the Spend-down. In essence, what this entails is the payment of outstanding bills. For instance, perhaps the marital residence has an outstanding mortgage encumbering it. The mortgage could be paid-down or paid-off. Once again, this reduces a countable asset, cash, and increases the value of an excluded resource, the home.

Yet another category of planning involves making uncompensated transfers, or gifts. The gifts can be made into a trust or outright to third parties, such as children. Whether the transfer is made to a trust or outright, the penalty period, or period of ineligibility for Medicaid, is calculated in the same manner. Though a gift does have the potential of resulting in Medicaid ineligibility, when made correctly, gifting can preserve tens of thousands of dollars and qualify an individual for Medicaid months, if not years, sooner than they would without gifting.

The key to all Medicaid planning is consulting with a professional knowledgeable in the laws governing this valuable program. There is money to save, but not from Medicaid, it’s for you.