Medicaid is a program that provides low-income individuals and families with healthcare benefits. It provides coverage for people who might otherwise go without vital medical care. It also provides long-term care benefits for many who would otherwise not be able to afford them. The process of determining Medicaid eligibility is neither straight-forward, nor readily understood.
In order to qualify for Medicaid, one’s income must be below a certain percentage of their “adjusted gross income”, and their assets must be below the state limit. The adjusted gross income requirements vary, but the federal poverty level is 133 percent for most Medicaid recipients. Also, Medicaid is not available to anyone whose assets exceed the limits specified by the program. Cash in bank accounts, real estate, and investment properties are among the excluded assets, and all—or nearly all—are ineligible.
Medicaid Planning: Why You Should Do It
Medicaid planning is a way for those who might not otherwise be eligible to organize their finances and assets to qualify for Medicaid. If you haven’t planned accordingly, when you hit a point in your life where you need Medicaid, you are unlikely to qualify. It is important to plan ahead for Medicaid so that you can get the care you need for yourself or your family members and ensure that you, not the government, keep your hard-earned money.
One of the most important benefits of Medicaid planning is that it helps to save assets when long-term care expenses rise. Most of the time, the cost of services in assisted living centers, nursing homes, home health care, and other long-term care settings is unaffordable. Individuals may be expected to pay the full cost of their care out of pocket for an extended period of time before qualifying for Medicaid benefits. Medicaid planning prevents individuals from losing their assets, which could lead to financial ruin.
Tools For Medicaid Planning
There are a variety of common tools people can use to qualify for Medicaid benefits. These Medicaid planning tools can help you safeguard your assets and set them up so that they stay below the income and asset thresholds needed to qualify for Medicaid. Let’s explore some of these planning tools and see how they might help you!
1. Transferring Assets
Nursing home Medicaid residents are permitted to transfer or gift their assets to someone else so that they may qualify for the program. An individual can transfer their house to their child or give their car to a friend, for instance. It is important that these assets be transferred before the consumer begins drawing down her assets to qualify for Medicaid in order to be exempt from Medicaid look-backs.
2. Qualified Income Trusts
This is also referred to as a “Miller Trust”. It is an irrevocable trust that is designed for purposes of income diversion to protect your assets for yourself or your family in the event of long-term care under Medicaid rules. You, as the consumer, receive a set amount of income from the trust every month that you cannot use to pay for your care. The trust needs to be in place five years before you are going to apply for Medicaid.
3. Irrevocable Trusts
Irrevocable trusts allow families to move assets out of someone’s name to meet the Medicaid asset cap. Theoretically, the assets would not be taken into account to determine whether a Medicaid applicant is over the asset limit if they are in the trust rather than in their or their child’s name. But as the name suggests, assets placed in an irrevocable trust are not refundable to the person who established the trust or the settler.
4. Annuity Trusts
Annuities trusts are a crucial tool in Medicaid planning, providing a tax-free stream of income for spouses to meet Medicaid income requirements. They can also address cash flow needs that may arise in an overall Medicaid plan. Annuities convert a lump sum into regular disbursements, generating income that can be used towards Medicaid requirements. However, this tool can be complicated, so it is best to work with a Medicaid planning attorney who has experience with annuities. They can assist in transforming a one-time lump-sum payment into income that can be applied to Medicaid requirements.
5. Personal Service Agreement
Sometimes called a caregiver contract or care agreement, it memorializes a specific contract for personal care services between a care recipient and a caregiver in writing. Medicaid planning often involves formalizing and documenting payments to a caregiver relative of a Medicaid applicant caring for his or her spouse for Medicaid eligibility. Such an agreement can help navigate Medicaid’s rules against transferring assets and paying family members. A personal service agreement can aid Medicaid planning in a situation where a care recipient is receiving informal care from a family member.
These Medicaid planning tools can be utilized to preserve as much of your life savings as possible while still qualifying for Medicaid benefits. You can start down the path to eligibility with the help of an elder law attorney or Medicaid planning professional who can help you understand when and how to use these resources.
Medicaid Spend-Down Strategies
Spend-down strategies, used to qualify for Medicaid, help those seeking care reduce their countable assets to a level that meets the program’s asset limits. In this way, you can avoid both spending money and incurring penalty periods while still caring for someone who needs you. Some helpful Medicaid spend-down strategies worth considering are:
1. Paying off debt
Paying down a mortgage or credit card debt reduces the family’s liquid assets—money that typically counts against someone as an asset. Thus, when liquid assets are used to repay a debt, assets effectively get converted to less-countable forms. To the extent that this reduces the number of countable assets available, these assets can be used to meet the spending rules and qualify for Medicaid.
2. Prepaying funeral expenses
A third way to defray assets is to pre-pay for one’s funeral. Advance payment for funeral services, caskets, burial plots, or cremations will count towards one’s exempt assets. As long as the amount paid for funeral expenses is within the allowable limits, this payment will not count against Medicaid eligibility.
3. Home modifications
Home modifications also qualify as a Medicaid spend-down that meets the spend-down requirements while enhancing life quality by improving a home to meet those enhanced needs. If Medicaid deems it to be medically necessary and reasonable, installing a wheelchair ramp, grab bars, or another accessibility modification in the home may qualify as a high-utility expenditure.
Hire An Elder Law Attorney For Your Medicaid Planning
Planning for Medicaid is a complicated process that you cannot just look up on the internet or talk to family and friends about. Planning or advising someone who is thinking about Medicaid planning requires an in-depth understanding of the Medicaid program and its rules and regulations. It is advisable to first speak with an elder law attorney to determine the purpose of planning and the best course of action to take. After discussing your case and reviewing any pertinent financial and medical records, they will be able to assess your likelihood of qualifying for Medicaid. In the event that they determine that you may be eligible for Medicaid, they will work to safeguard your assets and create a plan.
It’s never too early to start planning for Medicaid, but if you wait until you are in need of Medicaid, it could be too late. Give our Elder Law attorney, Ryan Jay Smollar a call today for a free consultation and to learn more about the best way to protect your assets and pay for your future care.