If a family member or you are looking into long-term care, you may have heard about Medicaid eligibility planning. Truly, the providers themselves are some of the foremost experts in this field as Medicaid is often how they are paid.
And while a long-term care provider may be expert, that does not mean that you should take their word for it in terms of how to plan and whether to plan to become Medicaid eligible.
Think about it: Medicaid is a needs-based benefit and that means it is for people who are in POVERTY. So the bottom line is that when you plan to become eligible, or to make a family member eligible for Medicaid, you are impoverishing that intended recipient. This has its own consequences. For example, a provider may not tell you that you or your loved one will be moved to a less desirable room or a room with a roommate once eligible or transferred to a “Medicaid bed.”
Long-term care insurance is a reasonable alternative to consider. Self-insuring with savings is another possibility. Think through ALL alternatives, ideally with an attorney, before diving into a plan toward Medicaid-eligible poverty.
These things being said, I AM in favor of Medicaid planning in many circumstances. I have seen extremely wealthy families driven into poverty by medical expenses, including long-term care. And without good planning, including an appropriate trust, they lose the benefit of funds that could have been used to improve the quality of life for themselves and their loved ones for the long term.
Here are some documents that can be used with the assistance of a capable attorney:
- Powers of Attorney: If the power of attorney says certain things, it can make planning easier. For example, if a parent needs nursing home care and has a whole life insurance policy with a cash value and a Roth, he is going to have to spend down these assets or transfer them to obtain eligibility. A transfer to a spouse could accomplish this without penalty, but if the parent does not have mental capacity, a financial power of attorney would be necessary to make it happen. Depending on how the power of attorney is written, this can be accomplished or may not be authorized.
- Court Approved Transfer: An attorney can help the family of a person with impaired mental capacity obtain authority for Medicaid planning gifts, and often this can be accomplished without a court appearance (by putting the matter on the non-appearance docket, for example).
- Five-Year Look Back Transfer: Parties can make gifts over a period of time in order to become eligible if these are consistent with Medicaid requirements.
- Beneficiary Deeds: If a party has such a deed in effect, they may not be eligible for Medicaid. You may want to give an agent the power to revoke such a deed in the power of attorney.
- Trusts: These are some of the most difficult trusts to draft and they should not be prepared without the assistance of a knowledgeable attorney with expertise in Medicaid trusts. I work with co-counsel to ensure such trusts are enforceable and accomplish what they intend to do. They need to provide (a) that distributions are in the trustee’s sole discretion and they must use language that prevents them from treating the trust as a “countable resource”; (b) they must be limited to supplemental needs; (c) they must be for the sole benefit of the beneficiary; (d) they must be revocable; and (e) they must include a “spendthrift” clause.
My rule of thumb is that the government abhors a vacuum sucking in their funds. Medicaid will try to unwind “planning” in the same way the IRS tries to unwind savvy tax planning.
For example, years ago, early in my career, I spent hours in depositions due to Medicaid seeking to unwind what they deemed Medicaid fraud. Our client was one of many health care providers that I would call collateral damage to the alleged fraud, which, after years of depositions, was never documented. But the costs were extreme, even if nothing more than the depositions and related legal fees. The family involved had to pay their own attorney along with everyone else. That was back then and government agencies are increasingly locking down every year.
Do NOT try this at home or in the lounge of a nursing home. Plan wisely and with wise, expert counsel of your own.
For more information about Medicaid planning assistance, contact Andersen Law PC by emailing me at firstname.lastname@example.org or calling 720-922-3880.
By Beth Andersen. Edited by Magpie Media.