Medicaid planning is an important part of estate planning for many people. Without the proper professional advice, there is the potential to make some mistakes that could cost you and your family quite a bit of money.
Medicaid rules change frequently, so it’s important to work with an experienced elder law attorney who can help you avoid some of these common mistakes:
- Putting off planning for too long: This is a big issue with the field of estate planning in general. People tend to procrastinate with their Medicaid planning, because they feel as though they won’t need to worry about it for years or decades. The truth is, the sooner you start your planning the more options will open up to you. It’s good to get an early start so you can plan for every eventuality and avoid having to stress out and make last-
minute, crucial decisions.
- Giving away assets: There is a common misconception that you can simply give away a whole bunch of your assets to meet the Medicaid eligibility requirements. While giving away assets can lower your assets limit for eligibility, you must have a strategy in place for giving away those assets. If you gave away any assets for less than fair market value in the five years before you applied for Medicaid, you must disclose those transfers on your application. Failure to disclose those transfers can have serious consequences. Each such transfer you have in that five-year period will hurt your chances at being eligible for Medicaid. This is another reason why early planning is so important—it allows you to plan to give away assets before that five-year window opens up.
- Attempting to use living trusts to protect assets: Assets in a revocable living trust still count toward your Medicaid asset limit, because you can revoke them at any time to pay for care costs. There are other types of trusts you can use to reduce your Medicaid asset limit, but revocable living trusts are not among them.
- Spending down on care costs: You are able to “spend down” on care costs, but it’s certainly not a requirement and it’s not advisable in some circumstances. You could potentially use those assets in other ways instead that would be more beneficial to the
person in need of care.
- Divorcing to protect assets: A divorce will not do much to protect your assets from long-term care costs. Keep in mind that the state is not bound by the terms of your divorce decree when determining Medicaid eligibility. If the spouse who receives care does not receive a fair share of marital assets, the state can still deny Medicaid eligibility if the spouse did not pursue assets that would have been available to him or her.
These are just a few examples of some of the most common Medicaid planning mistakes. For more information and tips, contact an elder law attorney at Baker Law Group, PC.