Elder law is estate planning for the elderly. Elder law practitioners focus on the concerns of an aging population. Examples of concerns include estate management in dementia, long term care, elder abuse, and guardianships. Medicaid Qualification and Medicaid Planning are key focus areas within Elder Law.
Medicaid is a comprehensive federal and state-funded health care program to assist with health care costs for low-income individuals. While Medicaid offers support to children, and disabled persons, and pregnant women of all ages, this discussion focuses on Medicaid for senior citizens (65 years and over).
Medicaid planning is a specific niche within Elder Law that addresses key elements of long term care. For seniors, Medicaid covers Community Medicaid that supports aging in place, and Chronic Medicaid that covers long term (e.g. nursing home) placement.
Community Medicaid was created to help keep recipients living in their homes, and out of long term care facilities for as long as possible. For example, this program pays for home aides to help with the activity of daily living, light housekeeping and meal preparation, and similar support. This allows many seniors to maintain their familiar home life and avoid transfer to a more comprehensive care facility. Remember, there are no income or asset tests for Community Medicaid.
Chronic Medicaid is the program that covers long term care, such as nursing home placement. When living in the home is no longer possible, Chronic Medicaid will pay for this long-term care. However, the state performs both asset and income tests to determine eligibility for the program. Without a properly developed plan in place to protect your assets and shield your income, the state will force you to draw down your assets to a minimal level before Medicaid will cover your long-term care costs.
Medicaid rules are complex. So, one of the biggest issues for seniors is not knowing they have Medicaid options. For example, many seniors are aware of strict income and asset tests in Medicaid. They believe they must have minimal income and exhaust most of their assets before they can avail themselves of Medicaid. Sheryll Law wants seniors to know that does not need to happen. We always try to assist senior clients in qualifying for Medicaid while protecting their assets to the extent possible.
For Chronic Medicaid, the state insists you have few assets, and has tests to see whether that is the case. Some may think they can quickly transfer their assets to children or others to qualify. Unfortunately, that is not the case. The state wants you to have made any such transfers five years before your Chronic Medicaid application. This avoids the appearance that the asset transfers were made simply to pass the Medicaid asset test. Here is where Medicaid Planning delivers value.
In a Medicaid Plan, you put some or all your assets in an irrevocable trust managed by a third-party, the trustee, whom you nominate. You no longer have control over the assets in the trust. If you transfer enough assets to the trust five years or more before you apply for Chronic Medicaid, you will pass the asset test. Regardless of asset transfer, you still have access to income produced by assets in the trust.
How much asset transfer is enough? It depends on your tolerance and need for control of your assets. For example, younger people doing advanced Medicaid planning may put their home in the trust but leave other assets out. As they become older, their plan should become more comprehensive with respect to asset inclusion. A healthy 65-year-old with a healthy spouse will feel one way about consigning assets to the trust, but at 75, the situation might be different. In case of a real emergency, an irrevocable trust can be revoked, but that would cause the trust plan to end. Revocation is a last-ditch option.
Starting Medicaid planning is like starting your estate planning. However, the addition of a properly drafted irrevocable asset trust becomes critical. The Sheryll Law estate planning questionnaire solicits the necessary information for both estate planning and elder care with Medicaid planning.
You don’t need to spend all your money to qualify for Medicaid. There is no look-back period for Community Medicaid, so you can transfer your assets to others just before you apply for the benefit. Chronic Medicaid does have a five-year lookback period. So, advanced planning is critical to preserving your assets. With advanced planning, Sheryll Law can save nearly 100% of your assets while you still qualify for Chronic Medicaid.
At Sheryll Law, we have a specific focus on estate planning, elder law, and Medicaid planning. Elder Law and Medicaid Planning is more specialized than general estate planning. Therefore, you want to select a firm that focuses in this area. Avoid having Medicaid trusts developed by practitioners who are not familiar with eligibility and recovery in Medicaid. Such plans may prove useless at a critical time.
It is common for individuals to “set and forget” their estate plan. Later, when health problems surface and the plan is reviewed, plan deficiencies also surface. For example, your plan may have a trust, but not a Medicaid-appropriate trust. Common lapses include specifying a revocable trust, allowing access to assets, developing a power of attorney with no gifting powers or other necessary powers, and similar. Sheryll’s Power of Attorney specification has been developed specifically to allow the Medicaid trustee to take the steps necessary to protect assets and distribute income.
Why is the right power of attorney so critical? Remember, your trust is like a ship, the assets are the cargo, and the trustee is the captain, and the beneficiaries are the destination. Your assets will be held in trust while you are living and distributed to the beneficiaries by the trustee when you decease. The trustee should be a fiduciary but not necessarily a professional trustee and may be a beneficiary of the trust. Without the right power of attorney, the Captain cannot steer the ship, avoid the hazards, and reach the destination safely.
Why should you get started with your Medicaid planning now?
Because you need to preserve your assets. Remember, for Chronic Medicaid, there is a five-year look back to see whether you transferred any assets to qualify for Medicaid.
If you transferred inside the five-year window, you will face financial penalties.
The risk of doing nothing or delaying action is being subjected to a state recovery or bearing a substantial piece of your long-term care cost.
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