It is never too late to plan for Medicaid. Of course, it is always better to plan ahead to ensure that you will qualify for Medicaid, but there may still be options, even if you suddenly find yourself, or a loved one, in need of Medicaid. Talk to your estate planning attorney to discuss those options.
Why is Medicaid planning important?
Medicaid is a need-based government assistance program that pays for medically necessary medical services. To be eligible for Medicaid, an individual must only have resources totaling $2,000. Your residence or homestead is not included when calculating your resources. But, it is still not difficult for your savings to be exhausted before Medicaid starts paying for the cost of long-term care. The purpose of Medicaid planning is to keep that from happening.
Understandably, individuals who anticipate that they will need long-term care in the future, don’t want to give up all of their assets in order to qualify for Medicaid benefits. So, they decide to transfer much of their assets to family members, so they can reduce the value of their estate.
You can’t just give your property away.
The problem is, you cannot simply transfer your assets into someone else’s name, once you realize you need to apply for Medicaid. In 2005, a law was passed that created a period of ineligibility for anyone who gave away their assets within five years of applying for Medicaid. This period does not begin until you actually apply for Medicaid. That’s why timing is important and early planning is crucial.
For instance, if you gave away $10,000 to a family member 4 years and 6 months prior to applying for Medicaid, the period of ineligibility would start when you apply, not when the gift was made. This period of ineligibility is known as the “penalty period.” The length of the period depends on the amount of assets that were transferred.
However, it isn’t always necessary to wait five years. Your ability to apply for Medicaid depends on each person’s specific situation. For instance, this penalty period is applicable only to individuals needing long-term care in an institutional setting, or receiving home health care. If you need acute care, including hospital or physician services, you will remain eligible to receive benefits for those services.
Medicaid trusts may be an option
A Medicaid Trust is a special purpose trust used to shelter your assets so that you can still qualify for Medicaid. This allows you to leave your money to your children as opposed to spending it only on long-term care. A Medicaid Trust is like other irrevocable trusts, however, you can actually be the income beneficiary. Your children or spouse would be considered residual beneficiaries. Simply put, you would receive income from the trust, up to the maximum amount allowed by Medicaid in order to remain eligible for benefits.
But, the earlier you start planning for long-term care, the better. Whether you are facing long-term care issues yourself or you have a family member who is, the time to plan is now. Contact the estate planning attorneys at Wilcox Attorneys, PA for questions regarding Medicaid Planning in Fayetteville and throughout Arkansas.
- Estate Planning is Essential Whether You Are Married or Not - April 25, 2018
- Income Tax Basis in Estate Planning – Part 2 - April 23, 2018
- The Downsizing Generation: How to Handle a Surplus of Stuff When a Loved One Ages - April 18, 2018