Too few older adults know and understand their rights and options regarding long-term care (LTC), which, is ruinously expensive. Wise seniors will start their benefits strategy long before they need nursing home care. In this blog, we would like to address common mistakes that could prevent you from getting Medicaid benefits.
Early Planning Is Key
Unlike Medicare (which does not cover long-term care), Medicaid is a means-tested program. In other words, applicants must have limited assets and low income to qualify. Medicaid rules are complicated and constantly changing but elder law attorneys can determine the best way to get the benefits you need. Any gifts or transfers made up to five years before the date of application will incur a penalty. There is no limit to how long a penalty period can be, forcing applicants to pay out of pocket for most of their care.
Avoid These Simple Mistakes…
Mistake 1 – Giving Funds to a Spouse
Married couples may think that if one spouse needs nursing home care and the other doesn’t, the applicant can simply transfer all assets into their spouse’s name. However, the state considers all assets for a married couple jointly owned and counted toward the applicant’s spouse’s Medicaid eligibility. So, when one spouse of a married couple applies for long-term care Medicaid, the value of both spouses’ assets is considered for eligibility purposes. For liquid assets, such as bank accounts, stocks, and savings, it does not matter if the asset is held in a joint account with both names or in separate accounts with only one name. All accounts are counted. As an example: Sam and Joan are married. Joan is applying for Medicaid but Sam is not. Sam has an account in his name only with $25,000. Joan has an account in only her name with $50,000. Sam and Joan also have a third, joint account in both names, with $75,000. Therefore, from Medicaid’s perspective, Joan has assets valued at $150,000 ($25K + $50K + $75K = $150K) That amount is expected to be put toward your long-term care needs.
Mistake 2 – Not Keeping Accurate Records
People anticipating long-term care needs have come up with ingenious ways to try to get around the rules penalizing gifts of assets. Medicaid reviews all of your property transfers to make sure you received fair market value for each one. You need to keep proper sales receipts and documentation for assets sold during the look-back period. A penalty could incur even if the item was sold for fair market value.
Mistake 3 – Not Giving Gifts and Spending Down Your Excess Cash
A skilled elder attorney can help you make the most of gifting rules and give away as much as possible before the five-year look back.
Mistake 4 – Having an Irrevocable Medicaid Qualifying Trust
Why do people want irrevocable trusts? The only three times you might want to consider creating an irrevocable trust is when you want to minimize estate taxes, become eligible for government programs, or protect your assets from your creditors. If none of these situations applies, you should not have an irrevocable trust. One way to preserve assets for your family is to create an irrevocable Medicaid trust. This trust can protect your property from being spent on long-term care and should be created before the look-back period. After you set up the trust, you will need to transfer assets from your name to a trustee who will hold them for your named beneficiaries. If you fail to retitle assets into the trust before the look-back period, those transfers will be counted as gifts and will not be exempt from penalties.
Mistake 5 – Not Filing Your Application on Time
The income limit per month for a single person is $2,523 in 38 states and Washington, DC for most types of Medicaid services. For a married couple, the limit increases to $5,046 in most cases. If you are eligible for Medicaid, you could miss out on several months of benefits if you do not file your application on time. This could take tens of thousands of dollars out of your family’s savings if you must pay several months waiting for approval of benefits. If you think you might need Medicare benefits, apply today.
We Recommend Hiring an Estate Planning Attorney
Do not wait to speak to a lawyer until you need to apply for Medicaid. Mistakes in care planning can have long-term financial effects on a family that can last for generations. A lawyer can examine your situation and help make sure nothing falls through the cracks.
The Medicaid application process can be complicated, confusing, and time-consuming. Any missteps in the process can result in lengthy delays in receiving approval or denial from your county Medicaid office. Have your eldercare attorney help you fill out the application. Expenses that are not covered by Medicaid must be paid out of pocket or through a private long-term care insurance policy. Since nursing home costs can run as much as $15,000 to $20,000 per month, even seniors with substantial savings can find themselves struggling to provide the care that is needed and must apply for Medicaid.
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