Every day, I meet with people who want to engage in Medicaid planning.  Medicaid is a government health insurance program for needy individuals.  Unlike most health insurance programs, Medicaid will pay for long-term care costs, such as care in a nursing home or assisted living residence.

Medicaid planning is a process through which individuals seeks to transfer assets to family members and qualify for Medicaid benefits sooner than they would qualify for such benefits if they had not engage in such planning.  Through Medicaid planning, I can, in many cases, preserve significant assets for family members of the individual who requires long-term care.

One impediment to such planning is when the elderly individual has an unequal distribution plan or when the case involves a second marriage.  What I mean by this can be explained with two examples.

Example One.  Mr. Smith requires nursing home care.  His daughter comes to see me.  Mr. Smith’s Will leaves everything to the daughter and nothing to his son.  Mr. Smith signed the Will six months prior to the daughter coming to see me.

Example Two.  Mr. Smith requires nursing home care.  Mrs. Smith, Mr. Smith’s second wife, comes to see me.  Both Mr. and Mrs. Smith have children from a prior marriage.

The problem with these situations is that any transfer of Mr. Smith’s assets has a strong probability of being challenged by someone.  If I instruct the daughter to transfer assets of Mr. Smith to herself, the son may step in and say that Mr. Smith was incompetent when he made his last will and testament and that the money should not have been transferred to the daughter.

If I instruct the wife to transfer the assets to herself, Mr. Smith’s children from a first marriage might step in and say that their father wanted them to receive his assets, not his wife, and that even though Mr. Smith is in a nursing home, the second wife may predecease Mr. Smith and they would then inherit Mr. Smith’s assets.

And you know what, they’re right, and that’s what makes Medicaid planning in these situations very hard.  It’s not impossible, but it’s harder.

In the second-marriage situation, I may wish to meet with Mr. Smith’s children.  In the disinheriting situation, I may want to obtain a guardianship over Mr. Smith and seek court approval for the transfer.