Medicaid estate planning

Medicaid Estate Planning Basics – What You Should Know

It is natural for aging adults to worry about their long-term medical care and begin to make plans. Medicaid estate planning is quite similar to general estate planning, requiring similar documents, and posing similar issues.

 The main difference is that, when it comes to Medicaid planning, the discussion focuses on the aging adult’s possible incompetence and on the negative influence some family members may have on them.

We will cover in this article

  • Medicaid Estate Planning and the Costs of Long-Term Medical Care
  • Medicaid Goals, Stipulations, and Benefits
  • Asset Eligibility Exemptions and Aspects to Keep in Mind during Medicaid Estate Planning
  • Marital Home and Assets
  • Spousal Support Refusal
  • The $14,000 Gift Exemption
  • The “Look Back Period”
  • Assets Transfer
  • Medicaid Estate Planning and the Costs of Long-Term Medical Care

    Costs are an important part of an aging adult’s Medicaid health plans. The goal of planning is preserving as much as possible of the aging adult’s estate, without affecting their eligibility for Medicaid long-term medical care.

    The first step for anyone seeking long-term care benefits is to develop a deep understanding of the legal landscape and learn the basics of the programs available to pay for long-term medical care.  Thus, Medicaid health plans should begin with a Medicaid overview.

    Medicaid Goals, Stipulations, and Benefits

    Medicaid is a federal program that came to life in 1965, with Social Security Act’s Title IX. Each state administers its own program, which means there may be slight differences from state to state. It is important to find someone who is familiar with your state’s plan.

    The program covers long-term care costs for eligible individuals.

    The recipients of Medicaid are usually financially and medically needy aging adults. For example, one’s income may not exceed the maximum $2,000 (the amount varies slightly from one state to another), and one’s assets are limited to essentials: one’s home on the condition that they receive homecare, funeral contract, life insurance, car of limited value, etc.

    These limitations are the most important part of planning. Many residents, advised by their lawyers or home care agency, use them to protect their assets and still benefit from long-term care costs coverage. We’ll review the most important asset exemptions in the following lines.

    Medicaid estate planning

    Asset Eligibility Exemptions and Aspects to Keep in Mind during Medicaid Estate Planning

    Marital Home and Assets

    One can qualify for Medicaid long-term care even when they own a house, as long as their spouse and child live in it, or the beneficiary is planning to return to live in it. They can continue to benefit from Medicaid support even if their spouse sells the marital home. In fact, one’s Medicaid benefits have nothing to do with their spouse’s rights and actions regarding medical benefits. Yes, selling the marital home after the beneficiary’s death could help pay the costs, but the spouse can keep their share of the estate and some other assets as well.

    Spousal Support Refusal

    The legislation in some jurisdictions allows the spouse of the Medicaid beneficiary to refuse to pay for their loved one’s care. Under these circumstances, many beneficiaries choose to transfer their assets to their spouses, to avoid selling them. This step should be taken with the advice of a lawyer, as the forms to be filled are very specific, and mistakes can be costly.

    The $14,000 Gift Exemption–

    The IRS lets contributors give away $14,000 of the money they owe, to anyone they like. However, such a gift would bring about penalties to a Medicaid beneficiary, or delay their eligibility due to the “look-back period” for transfers.

    The “Look Back Period”

    Medicaid applications are reviewed with a 5 year look back period. This means one cannot just transfer their assets and apply for Medicaid. They need to meet the eligibility criteria for 5 years before applying.

    Assets Transfer

    Medicaid applicants can only transfer assets to their spouses, since the application includes the assets of both spouses, to blind or disabled children under the age of 21,  to special trusts for disabled persons under 65 years of age. Other exemptions refer to residences transferred to siblings with equity interest, or to caregivers who have lived in the residence for the previous 2 years.

    If you or someone you care about are considering Medicaid as an option to cover your long-term care needs, you should contact your health care provider. They have an interest in helping you since this will impact their reimbursements as well.