Medicaid Planning 101

One of the most common misconceptions about long-term care (LTC) planning is that Medicare will cover it for you. The unfortunate truth is that the the kind of services entailed for LTC are only offered by Medicare for a “short term” (ironically) and in limited circumstances. 

That being said, if you don’t have LTC insurance or the funds to private pay for your care, you can easily find your self in a very serious financial predicament. This is a predicament which impacts not only you, but more importantly those you love and care about. This is precisely when individuals look to Medicaid Planning, because Medicaid, unlike Medicare, does cover long-term care services.

Medicaid planning involves taking steps to structure your financial affairs in a way that allows you to qualify for Medicaid benefits while protecting your assets.

Medicaid is a joint federal and state program that provides health coverage to individuals with low income, including coverage for long-term care services. Keep in mind that Medicaid planning should be approached carefully and well in advance, as there are strict rules and regulations.

In this article we’ll list some common strategies for Medicaid planning. Please note however, that there is a lot more to know about each one of these options before choosing your strategy. The list below is a simple “Medicaid Planning Cheat Sheet” for you to at least be familiar with some of your options.

    Asset Protection Trusts:    

Irrevocable Trusts: Transferring assets into an irrevocable trust removes them from your countable assets for Medicaid purposes. However, once assets are placed in an irrevocable trust, you generally cannot access or change them, and Medicaid has a "look-back" period during which any asset transfers will be scrutinized. Transfers made within this period may affect your eligibility. 

    Spend down:    

If your countable assets exceed Medicaid’s financial limits in your state, it is possible to become eligible by “spending down” your assets to the point where you become financially eligible. For example, using excess funds to make home improvements or paying off a mortgage can reduce your countable assets. However, there are Medicaid spend down rules about how one can legally spend down their financial resources.

Gifts and Transfers: Gifts to Family Members: Transferring assets to family members as gifts can help reduce your countable assets. However, gifts made within the look-back period may affect your eligibility.

Caregiver Agreements: Compensation agreements with family members for care-giving services can be structured to transfer assets while compensating family members for their assistance.

    Conversion of Countable Assets:    

Convert countable assets into non-countable assets. For example, if you have an IRÅ that is considered a countable asset, you can convert it to a non-countable asset.

    Spousal Impoverishment Rules:    

Spousal Allowances: If you are married and one spouse needs Medicaid (the applicant), certain assets and income can be allocated to the non-Medicaid spouse (community spouse) to ensure they have sufficient resources for living expenses, while allowing the applicant spouse to meet the financial criteria to qualify for Medicaid.

    Prepaid Funeral and Burial Plans:    

Medicaid allows individuals to prepay funeral and burial expenses as a way to spend down assets, BUT contracts must be irrevocable.

    Exempt Assets:    

Home Exemption: In many cases, your primary residence is exempt from Medicaid asset calculations. There are certain rules, such as a maximum equity limit, so it's important to be aware of the specific regulations in your state.

    Medicaid Compliant Annuities:    

Specialized Annuities: Some annuities are designed to comply with Medicaid rules. These annuities must meet specific criteria to be considered non-countable assets.

    Qualified Income Trust:    

If your income is over the limit to qualify for Medicaid long-term care services (including nursing home care), a Qualified Income Trust (QIT) allows you to become eligible by placing income into an account each month that you need Medicaid.

It's crucial to consult with a qualified elder law attorney, [ we know someone 😉 ] experienced in Medicaid planning, before implementing any strategy. Laws and regulations vary by state, they are complex, and improper planning can lead to penalties or delays in Medicaid eligibility. Additionally, Medicaid rules and policies may change, so staying informed about current regulations is essential.

Schedule an Advanced Care Planning Session

 "I hope this article deepens your knowledge of Medicaid Planning and also opens your eyes to the importance of putting together such plans, in advance. Medicaid planning is not something you do last minute, mostly because it takes time to get it done." - Minerva