Medicaid Planning

Questions and Answers to 6 most common client concerns

1. What is the difference between Medicaid and Medicare?

   People tend to confuse Medicaid and Medicare, but the two programs are not the same. Medicaid is a joint federal-state program that pays certain healthcare costs. The program is needs-based, meaning that it is available to those who meet certain financial criteria, including income and asset limits. Medicare is a federally-funded health insurance designed for people 65 and older. It is also available for younger people who have certain disabilities. While Medicare covers many healthcare expenses, it does not provide complete coverage. For instance, many people are surprised to discover that the program’s coverage for long-term care is extremely limited.

2. Can’t I just give away my assets and qualify for Medicaid benefits?

   Some people mistakenly believe that they can simply give away some or all of their assets to their children or other relatives in order to qualify for Medicaid. While part of Medicaid planning may involve giving away some of your assets, this has to be done with extreme caution and should only be done with the advice of an experienced elder law and estate planning attorney. If you give away your assets at the wrong time, or use the wrong method, you can face tough penalties. In 2006, the federal government passed a law that included a “5-year look-back period” which imposes penalties for certain asset transfers made within the 5 years before you apply for Medicaid coverage.

3. Can’t I just add my son/daughter’s name to the title of my house to avoid losing my home to Medic

   If you receive Medicaid benefits, after your death the state tries to recoup the money spent on your care. They do this by trying to collect against the assets you leave behind. Since you can have very little assets in order to qualify for Medicaid, the state usually goes after the few remaining assets left, like the home. This is known as estate or Medicaid recovery. Recovery is allowed in most circumstances and in most states on assets owned in Joint Tenancy, unless the only other joint tenant besides you is your spouse. Additionally, if you change the title on your home to your child’s name alone, rather than adding them to the title, it would be considered a gift and in most circumstances would create a penalty if you applied for Medicaid benefits within 5 years. Also, keep in mind that adding your child’s name to the title on your home or other assets could expose you to their creditors, divorce, and other unforeseen financial problems. Therefore, there is only a very small percentage of situations where adding a child’s name to the title could work for Medicaid planning.

4. When is it too late to do Medicaid planning?

   It is never too late to do Medicaid planning. However, the best way to plan for Medicaid and long-term care is to do so well before the need arises. This is pre-need planning, and it gives you the most options for preserving your assets. Crisis planning, when someone is already in a nursing home or needs immediate long-term care, can be an incredible help to those facing an immediate need for Medicaid benefits. But, crisis planning has its disadvantages, such as the inability to take advantage of planning that escapes the 5-year look-back period, which may reduce the amount of assets you are able to preserve.

5. My parent/spouse has early signs of dementia, can we still do Medicaid Planning?

   The first step is to determine their “capacity,” which means someone fully understands the decisions they are going to make. When you come into our office, if there is a concern about capacity we will ask you to contact their physician and ask for a statement from them on your loved one’s ability to make these decisions. If it is determined that your loved one has capacity, then we would need to ensure that there is an incapacity plan in place to preserve the ability to do future planning with the use of Powers of Attorney, etc. Then we can help you with any Medicaid planning that would be appropriate for your situation right now. However, if it is determined that they do not have capacity, we will need to see if they have an incapacity plan in place that would allow someone else to make these planning decisions on their behalf. If there is no incapacity plan in place, it may be necessary to go to court to appoint someone to make those decisions for them.

6. What are the disadvantages to a Medicaid trust?

   The main disadvantage is that you’ve made an irrevocable transfer of your assets to the trust and you cannot undo this transfer. However, typically you retain the right to income for life from the assets you’ve transferred and you may continue to live in your home, while preserving your home from Medicaid recovery.