People who are approaching their advanced years may think they have planned for all eventualities. They have saved up money, secured retirement funds over the years, and think they have everything covered since they are now Medicare eligible due to their age. But what they may not be aware of is that an extended hospital stay or becoming a resident of a nursing home or assisted living facility can undo all of their best plans. This is because your assets will end up going to pay for long-term care until you become Medicaid eligible. This is why it is crucial to work with an experienced elder law attorney here in Pennsylvania to work on a Medicaid plan.
Why Do You Need to Do Medicaid Planning?
As we get older, our medical needs increase. Whether it is more medication for chronic ailments or the need to see a wider variety of physicians, we see that elderly people will end up having to spend more for healthcare. This is why the Medicare program was created in 1965. However, Medicare does not cover long-term care. Instead, individuals will have to pay out-of-pocket for their stays at nursing homes, assisted living facilities, and skilled nursing facilities. The same will often happen if the person has home care.
A number of elderly people get long-term care insurance policies. But, the problem here is that the premiums can be quite costly depending on your age and physical condition, and they will often have a cap on the amount paid and the length of time covered. So, an elderly person with this type of insurance will often outlive the policy limits. When this happens, the facility or provider will look to the person’s assets to cover the costs and expenses of long-term care.
Medicaid planning is designed to address this, providing a means to make sure you get the healthcare you need. By planning for Medicaid, you will be able to protect your assets. This will also ensure that you have assets that you can transfer to your loved ones. This is why Medicare advises people to begin planning for their long-term care needs long before the day arrives when you are looking at home care and nursing homes.
What are the Options for Medicaid Planning?
There are a number of different options you can consider for Medicaid planning. All of them are designed to protect your assets from being claimed, while making sure you get the long-term care you need. While each has different aspects and benefits, all are things you need to do as soon as you can. This is because Medicaid has a five year lookback period here in Pennsylvania. This means that Medicaid will look back over the prior five years to see if there were any gifts or transfers of assets in the five years prior to applying for Medicaid. While some gifts are exempt, if Medicaid finds that assets were gifted during the lookback period that were not covered by an exemption, it can impose a penalty period during which the individual is ineligible to receive benefits, based on the value of the gifts and the average monthly cost of long-term care in Pennsylvania. This is why Medicaid planning is not something that should be left to the last minute.
One option is for the individual to spend down his or her assets. Certain transfers and expenses are exempt from the Medicaid lookback. For example, gifts to a person’s spouse or a disabled child are exempt transfers. So are spending on home modifications, medical expenses, legal fees for assistance with applying for Medicaid, and prepaying funeral expenses. This could have the effect of reducing an individual’s assets so they fall below the limit to apply for Medicaid.
While a spend down is one option, it may not work, especially for individuals with higher net worth. Another option is to set up an irrevocable trust. This is where the individual transfers control over his or her assets into an irrevocable trust, which is different from a revocable trust where the individual maintains control. This will require structuring it correctly to comply with Medicaid rules, and appointing a trustee who is someone you trust. One of the requirements for a Medicaid compliant trust is that the trustee cannot be a beneficiary designated by the irrevocable trust.
An option that many people consider is to transfer any excess assets into a Medicaid Compliant Annuity. This will shield the assets from being claimed, and will not count toward your Medicaid eligibility. However, these are very complex transactions that require the assistance of an experienced attorney.
A final form of Medicaid planning that will shield your assets is to make a Medicaid compliant real estate transfer. If a person gifts a home to a sibling or adult child who has resided in the home with the applicant for at least two years, this will be an exempt transfer under Medicaid rules, and will not be subject to claim nor will it be counted for Medicaid eligibility.
Why Do You Need to Protect Your Assets from Medicaid?
Medicaid has an Estate Recovery Program. This operates for the purpose of claiming assets from individuals who have made ineligible transfers during the five-year lookback period. In the case of a person who subsequently dies, this can cause a major complication in an estate, both delaying the transfer of estate assets to heirs and also potentially depriving the heirs of their inheritance. Proper Medicaid planning will provide protection of your assets so your loved ones will not have to deal with this.
Properly planning for Medicaid will also shield your assets from being claimed by health care institutions and providers. In situations where an elderly person with assets is in long-term care, they could see their funds subject to collection attorneys to pay for the high cost of care. Properly planning for Medicaid will make sure your loved ones get the inheritance you intended, while smoothing the process for you to apply for Medicaid benefits.
Contact Our Elder Law Attorneys Today
Proper Medicaid planning should be part of your estate plan. However, too many people in Pennsylvania neglect this, seeing their assets depleted by a stay at a long-term care facility. The experienced elder law attorneys at Jones, Gregg, Creehan & Gerace will help you with your Medicaid planning so you can get the care you need while protecting your net worth.