After years of hard work, your retirement plans might include rest, travel, taking up hobbies, and so on. But the harsh reality is that many of us will end up needing expensive long-term care facility. Long-term care insurance and Medicaid can defray some of the costs but many do not have insurance or it is not affordable for them. However, you may be forced to use some or all of the nest egg you carefully built before Medicaid benefits start. So, what can you do to prepare for the future? Medicaid asset protection can help you preserve your wealth while ensuring a good quality of life.
But you may be wondering what ‘Medicaid asset protection” actually means.
Some Important Details About Medicaid Asset Protection
The name gives you the general idea. It’s a way to protect your assets, but the title alone does not explain the connection between your property and Medicaid. To understand, we need to look closely at how you qualify for Medicaid.
In Pennsylvania, Medicaid is called Medical Assistance (MA). To receive MA benefits, you must meet eligibility requirements that generally relate to your:
- Functional ability, and
Medicaid looks at both your income and your resources (what you own) when deciding whether to award benefits. Not all your income and resources will count against your eligibility. In this article, we are more concerned with Medicaid asset protection planning.
For example, George is 63, married, and semi-retired because of a medical condition. He and his wife earn only $2,200 per month, but they own countable resources totaling more than $10,000. Medicaid may reject his request for benefits because of his assets. An attorney with Medicaid experience might advise him on ways to preserve resources and obtain an approval.
Here’s where Medicaid asset protection comes in. With your attorney’s help, you might set up an irrevocable trust that preserves as much of your wealth as possible. Generally, the property you transfer to the trust no longer counts toward Medicaid’s resource limits. When you pass away, the terms of the trust dictate what happens to the remaining trust assets.
So, you might be able to give your family the benefit of your hard work while still preserving your quality of life. That is, as long as Medicaid pays for the bulk of your nursing home expense. Often people who go through this process make innocent mistakes that can cost them dearly later. Remember that an experienced elder law attorney can make sure your Medicaid asset protection plans do not violate any laws.
Timing Matters When It Comes to Medicaid Planning
When applying for Medicaid, you must supply financial information for the previous five years. This time frame is called the 5-year (or 60-month) Medicaid Look Back Period.
Property transferred or sold for less than the fair market value during the Look Back Period could trigger a penalty. Medicaid could delay your benefits based on its calculation of your penalty period.
For example, Sadie signed her house over to her daughter in 2018. When Sadie applied for Medicaid in 2020, she learned her benefits would be delayed because of that innocent and generous transfer. Since the house was worth $200,000.00 the penalty period was approximately 1.5 years where she needed to come up with a way to pay for care when she had no other money.
Medicaid asset protection plans prepared with the advice of an experienced attorney may eliminate this problem for you. Crisis planning at the last minute is an option but ideally, your planning should take place earlier. Since few of us know what the future holds, the optimal time for medical planning seems to be right now.
Talk to an elder law attorney as soon as possible to see what options work for you.
Don’t Wait to Discover Your Medicaid Asset Protection Options
Trust your future to someone who has deep experience working with Medicaid. Attorney Robert Slutsky was one of the first lawyers in Pennsylvania to focus on elder law issues, including Medicaid. He’s helped countless people find solutions that work for their individual situations.