Few crises are more stressful than those related to health and long-term care. It is hard enough to navigate these complex issues during the best of times. In a world full of uncertainty, they become even more stressful and urgent.
As we all wrestle with the day-to-day reality of COVID-19, the already daunting task of figuring out how to sustainably support necessary home care, medical services, nursing home costs, and other critical expenses quickly becomes overwhelming.
And the situation is exponentially worse if you’ve waited until you’re in crisis to address the important questions of how to pay for critical services, protect your assets, and ensure your comfort, security, and quality of life.
Waiting until it’s too late is the biggest mistake older adults make when it comes to planning for ongoing home care or long-term care in a nursing home or other facility. In many cases, they put the task off because they just don’t know where to start. And that’s understandable!
There are also a lot of misconceptions about Medicaid. Many people don’t realize, for instance, that Medicaid does cover home care (something that is particularly needed right now since many people would prefer to stay out of nursing homes during a pandemic).
The good news is that while applying for Medicaid is a complicated process, we can help you understand the process and work with you to ensure a positive outcome. In this piece, we’re going to provide an overview of how to establish Medicaid eligibility, protect your assets, and successfully complete the absolutely grueling process of submitting the Medicaid application.
Establishing Medicaid Eligibility – There are a lot of rules.
Many people mistakenly assume that you have to be completely broke to qualify for Medicaid. This isn’t true. There are, however, very specific rules you need to adhere to in order to establish Medicaid eligibility.
There are income and asset limits. An individual Medicaid applicant must have assets of no more than $1,600, and income of no more than $2,349 per month. There are nuances to this rule, however, that many people overlook. For instance, in most cases, an applicant’s home and car do not need to be counted as assets.
Another example of something people often overlook is the ability to “spend down” assets by paying for care or other needs. Acceptable expenses in a spend-down strategy include things such as
- dental work
- home improvements (grab bars, wheelchair ramps, even adding a bathroom to the first floor)
Applicants are also allowed an irrevocable burial contract up to $10,000. This document needs to be structured and written in a particular way, but it’s a smart way to put aside money to cover final expenses while also helping ensure eligibility for Medicaid.
What is not allowed is giving away assets within the 5 years prior to applying for Medicaid. This is because Medicaid has what’s called a “look-back” period that requires disclosure of five years’ worth of financial statements including all accounts (checking, savings, money market, stocks, bonds, CDs, retirement accounts, annuities, trusts, cash value in life insurance policies, and more).
Any assets given away in the five years prior to a Medicaid application can trigger a Medicaid penalty period . More specifically, for every $13,512 you give away, there’s an ineligibility or penalty period of one month.
Rules of Medicaid Eligibility
What is the Look-Back Period?
What is “spend-down?”
Medicaid: Don’t Try This at Home
Understanding and Preparing for Long-Term Care Costs
Protecting Your Assets – You have options.
You have worked hard for your money, it only makes sense that you’d like to preserve as much as you can for you and your family. Even when you are applying for Medicaid and need to adhere to strict income and asset limitations, there are things you can do to protect your assets.
Like with most Medicaid-related things, timing is of the essence. The sooner you act, the better off you’ll be.
One of the most common tactics for preserving assets without jeopardizing Medicaid eligibility is to transfer funds into a Medicaid irrevocable trust or asset protection trust. This is a legally enforceable arrangement that allows you to transfer property to someone else (the trustee), who holds the property for family members, typically children.
There is a tradeoff since neither you nor your spouse can be beneficiaries of this trust, and you cannot amend or revoke it. However, it does offer a fairly flexible way to maintain some level of control over the trust (in terms of assigning beneficiaries and trustees). It can also be written to allow for life use or use and occupancy of a residence, for example; and additionally gives you the option to sell property under the personal residence capital gains tax exclusion. Speaking of taxes, there are also substantial tax benefits for this kind of trust.
Completing the Medicaid Application – Yes, it’s a bear.
Last but not least, we come to actually applying for Medicaid. Without exaggerating, it’s fair to say that this is a complicated process that requires extreme caution and attention to detail. We strongly recommend working with a Connecticut elder law attorney. There are many companies that claim to be able to process Medicaid applications at a low cost, but these non-attorney providers actually cause their customers great harm—putting Medicaid applicants at risk for a number of serious issues including denial of eligibility, severe tax liability, loss of spousal assets, and other unpleasant situations that may threaten the client’s life savings and other assets.
Once more, it bears repeating that timing is critical. Applying during the middle of a major healthcare crisis is not optimal. The best time to take action is long before a crisis strikes, when you have the time and wherewithal to work with an elder law attorney to collect all the relevant documentation and fill out all the required forms.
Even the Medicaid form advises taking action sooner than later. The instruction, “DO NOT WAIT TO APPLY” is printed right on page one. This is because even in the best-case scenario, it can take two months to be approved; and it’s not unlikely that it could take six months or even longer. The more of a head start you have now, the less likely you’ll find yourself in dire straits later.
Don’t Feel Like You Have to Do This Alone
The bottom line is that qualifying for and applying for Medicaid is a complicated process that is best done with the hands-on assistance of an elder law attorney who has full knowledge of all the laws and how to navigate the process. While it’s possible to apply on your own, doing so can put your eligibility and assets at risk. Ultimately, a misstep in the application process can have severe and irreversible financial and other consequences.
Reach out to us when you’re ready to start navigating Medicaid for your loved one – we can help take the burden off of you.
And don’t forget: Medicaid DOES cover home care!