Medicaid planning can be a difficult and confusing process. The following are some common mistakes people make when planning to apply for Medicaid.
- Thinking it’s too late to plan. It’s almost never too late to take planning steps, even after a senior has moved to a nursing home.
- Giving away assets too early. First, it’s your money (or your house, or both.) Make sure you take care of yourself first. Don’t put your security at risk by putting it in the hands of your children. Precipitous transfers can cause difficult tax and Medicaid problems as well.
- Ignoring important safe harbors created by Congress. Certain transfers are allowable without jeopardizing Medicaid eligibility. These include: transfers to disabled children, caretaker children, certain siblings and into a trust for anyone who is disabled and under age 65; a transfer to a ‘pay-back’ trust if under age 65; and to a transfer in some states to a pooled disability trust at any age. (Note, however, that in Virginia, transfers to a pooled disability trust of assets of a disabled individual who is older than 65 must be evaluated as uncompensated transfers of assets, if the trust is structured such that the individual irrevocably gives up ownership of funds placed in the trust.) Assets transferred to a pay-back trust after the disabled individual turns 65 would also be evaluated as uncompensated transfers of assets.
- Failing to take advantage of protections for the spouse of a nursing home resident. These protections include the purchase of an immediate annuity, petitioning for an increased community spouse resource allowance, and in some instances petitioning for an increased income allowance or refusing to cooperate with the nursing home spouse’s Medicaid application.
- Applying for Medicaid too early. This can result in a longer ineligibility period in some instances.
- Applying for Medicaid too late. This can mean the loss of many months of eligibility.
- Not understanding how Medicaid affects your home. In many states, nursing home residents do not automatically have to sell their homes in order to qualify for Medicaid, but that doesn’t mean the house is completely protected. Some states will put a lien on the house while the resident is living and attempt to recover the property after the resident has passed away. In Virginia, the home is only exempt for a period of 6 months after admission to a nursing home, unless some other exclusion applies, such as having a spouse or disabled child who continues to reside in the home, or having the home listed for sale at 100% of its assessed value.
- Not getting expert help. This is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars are at stake. It’s penny wise and pound foolish not to consult with an attorney who knows how to guide clients through the process.
*This article is provided for persons interested in elder law issues in Virginia and across the United States. This article has been written by a practitioner in the field of elder law, but unless otherwise noted, the writer is not affiliated with ThompsonMcMullan, P.C. Nothing in the newsletter or the articles is, or is intended to be, legal advice or a substitute for legal advice. If you need legal advice of any kind, please consult an attorney with experience in that area of the law, whether in our firm, or otherwise.