What Is Medicaid Planning?

by: Begley Admin

Medicaid planning involves thinking about how to qualify for Medicaid benefits, with an eye towards preserving a family’s wealth. Long term care is a major expense for many after their retirement years. Indeed, according to recent studies, about 43 percent of people will need long-term care at some point in their lives. The cost of this care in New Jersey and Pennsylvania is high, and rising. For example, costs of care can range from $20 – $25 per hour or more for in-home care, and between $8,000 – $12,000 per month for nursing home care. This amounts to $96,000 to $144,000 per year.

The need for Medicaid planning arises because Medicare does not cover long term care expenses. Thus, unless someone has long term care insurance, to pay for a long term care facility, individuals have two basic options: pay out-of-pocket or qualify for Medicaid. For those with significant assets, paying for long term care out-of-pocket may not be an issue; however, for most families, this is not the case. And even for wealthy individuals, there may be strategies to preserve wealth when applying for Medicaid.

The primary concern over Medicaid planning is that, under Medicaid eligibility criteria, there is a five-year lookback period. If a Medicaid applicant transfers assets to another person within five years of applying, Medicaid may penalize them with a period of ineligibility. This can result in the unnecessary spend-down of assets and, worse yet, may mean that someone does not receive the medical care they need. Thus, Medicaid planning is most beneficial when it is done at least five years before someone applies for benefits.

Medicaid eligibility requirements are extremely complex, and beyond the understanding of most people who are applying for benefits. Unfortunately, too many people learn this the hard way, only learning of these challenges after it is too late to do anything about them. However, a New Jersey Medicaid planning attorney can help families develop effective strategies that take their unique circumstances into account. A few of the most common Medicaid planning strategies include:

  • Asset protection trusts
  • Income trusts
  • Medicaid compliant annuities and promissory notes
  • Caregiver agreements
  • Spousal transfers
  • Spousal refusals
  • Irrevocable funeral trusts
  • Qualified income trusts

A home is perhaps the most common asset that puts someone over the Medicaid asset limit. While it may be tempting to merely transfer ownership of a home well in advance of the five-year lookback period, doing so may incur significant risk, and this alone is not an effective Medicaid planning strategy in most cases. For example, transferring a home to a loved one may subject the home to the transferee’s creditors or subject the transferee to unfavorable tax consequences. Additionally, the transferor will lose control over the home. Thus, although this may seem to be an easy choice for Medicaid planning, it is often too good to be true, and may result in adverse consequences to both the transferor and the transferee.

If you have not yet met with a New Jersey Medicaid planning attorney to discuss how you will pay for long term care should the need arise, now is the time to do so. At the Begley Law Group, our dedicated team of estate planning attorneys will create a custom-tailored plan designed specifically for your family’s unique needs. Having served clients across New Jersey and Southeastern Pennsylvania for the past 80 years, our strength comes from our experience. To learn more, call 856-235-8501, or toll-free at 800-533-7227. You can also reach out to us through our online form.