Ten misconceptions about Medicaid qualification and planning. When a family member is ill or incapacitated, providing the necessary care can become overwhelming for the family. Often the financial strain which accompanies the necessary care can devastate a family’s financial plan. Long Term and Waiver Medicaid programs are joint Federal State programs designed to pay for long term care based on the individual’s medical needs and financial status. 1. I can’t give away anything and qualify for Medicaid. Medicaid rules and penalties are complicated. Any individual should, at very least, consult with an Elder Law Attorney before they transfer their assets. Most asset transfers, save for a few exceptions, are usually subject the individual to penalties that result in periods of ineligibility for Medicaid. 2. If I give my assets away, I won’t be eligible for Medicaid for five years. Medicaid will look back at gifts made within five years. When a person applies for Medicaid, the application asks if the person has made any transfers to other persons within the five years preceding the application. If a transfer has taken place during the lookback period, then a penalty may be imposed. An Elder Law Attorney may be able to design a strategy to protect assets within the five-year period. 3. I must spend all my money before I can receive Medicaid. This is not always true. Individuals and married couples are permitted to keep/own certain types of assets and still qualify for Medicaid. Examples of exempt resources include one vehicle, household furnishings, pre-paid funerals, and the family residence if the applicant or spouse is still living there. Besides these exempt assets, a single individual may keep $2,000 but a spouse may keep up to $128,640. (2020 MT rules) 4. I can spend down my assets only on medical or nursing home bills. This is not true. Clients should seek advice from experienced elder law attorneys to spend the excess resources in ways that most benefit the clients and their families, and, in particular, can provide a spouse remaining at home with a good quality of life. 5. Once I am in a facility, it is too late to start Medicaid Planning. In cases where planning was not done before the person entered a nursing home, assets may still be protected. With proper planning, under current law, it is often possible to save from 40% to 100% of the institutionalized individual’s assets. 6. My retirement assets are safe when my spouse gets Medicaid. When a married person applies for Medicaid, the assets of both spouses are considered. Without proper planning, a spouse’s retirement assets are in jeopardy. However, strategies can be implemented to ensure the spouse has the funds for a comfortable lifestyle. 7. If my assets are owned by a living trust, they are protected from nursing homes. Assets owned by a living trust are generally vulnerable to nursing home costs and are counted when determining financial eligibility. However, some types of trusts may be used to protect assets. 8. I can give away a certain amount of money per year under the Medicaid rules. This is not a Medicaid rule, but a federal tax rule. The federal gift tax rule permits persons to give up to $15,000 per year per donee without filing a federal gift tax return. If gifts are made that exceed this limit, a gift tax return must be filed, but normally gift taxes are not owed because of the lifetime gift tax credit. Gifts made as part of Medicaid planning may well exceed the $15,000 per year per donee limit, and a gift tax return may have to be filed. 9. All my income must be used for my spouse’s nursing home bill. The treatment of a couple’s income by Medicaid is complicated. Unlike rules of resources, the Medicaid rules of income follow the “name on the check” rule: that is, each spouse’s income is considered separate property. This means that the healthy spouse can retain all their own income. In some cases, the community spouse is also entitled to share in some or all the institutionalized spouse’s income. 10. I can file by myself or the facility will help me. Medicaid laws and regulations are complicated and subject to change. Timing is important. Because private payment rates are higher than Medicaid rates, the nursing home has no incentive to assist clients in protecting assets and often will give incorrect information. The filing of a Medicaid application is comparable to filing an income tax return that you know will be audited. Be sure to consult an Elder Law attorney in order to avoid mistakes in Medicaid asset protection planning.
Contact Shyne Law Group, PLLC for a free consultation regarding your medicaid planning.