This guest post was submitted by Senior-Planning Services.
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Qualifying for Medicaid for long-term care can feel like contending with a labyrinth of rules, exceptions to those rules, and exceptions to the exceptions. As if that were not challenging enough, Medicaid rules can also vary drastically from state to state, and as financial or living circumstances change.
Compounding the difficulty even further, those applying for Medicaid are typically under a great deal of stress and pressure as they cope with having to admit a loved one into a nursing home or assisted living facility.
The entire conceit of Medicaid is that it is a “need-based” program. This means that the Medicaid applicant must have insufficient assets to pay for their own care.
Therein lies the kernel of the problem: Since the test for whether an applicant qualifies for Medicaid benefits becomes one of evaluating their assets to see if they pass a certain financial threshold, it naturally follows that there will be a great many seniors who may fall just outside that limit disqualifying them from Medicaid.
Without guidance, these seniors on the Medicaid borderline get caught in the unenviable position of too rich to qualify, but not rich enough to afford quality care, in essence, punishing prosperity.
Medicaid Spend Down and Asset Management
Fortunately, there are concrete strategies for dealing with this issue. In general, the idea is to make the applicant eligible for benefits by bringing the assessment of their assets under the limit. This is called Medicaid “spend down.”
In a spend-down, the applicant is required to pay bills from their own funds until their funds are depleted, at which point Medicaid kicks in on the condition that other eligibility requirements are met. Here, the single smartest decision an applicant can make is to hire a Medicaid planner to assist in the procedure, because doing so counts towards the ‘spend down’ itself.
An applicant can essentially use the free money over the limit (that must be spent anyway) to get themselves approved in advance through a Medicaid planning company, while at the same time receiving professional help with the process itself. An all around win-win.
A professional can assist with the classification and management of assets to help ensure that the applicant qualifies for Medicaid while still retaining the most wealth possible.
Many are unaware that items such as personal possessions, a car, prepaid funeral expenses, Term life policies German Reparation Payments, and financial instruments like trusts set aside for the care of a disabled child, or irrevocable trusts created over 5 prior to the Medicaid request date, are NOT counted against the applicant.
Meanwhile, checking and savings accounts, assets like CDs, stocks, bonds, IRAs and mutual funds, revocable trusts, whole life insurance policies, private business and company equities, and even more, CAN all count against the applicant in qualifying for Medicaid. Click here for more FAQs.
Quite often, a senior Medicaid applicant has shared his/her life with a cherished loved one. Under complex Medicaid laws, this can affect a spouse’s ability to qualify for Medicaid, and can lead to–for example–questions about whether a spouse can keep a primary residence if the other spouse applies for Medicaid. Generally, they can.
However, in some cases the Medicaid applicant’s name must be removed from the deed. There can also be Medicaid liens and other penalties enforced against the estate, except in certain circumstances, such as in the case of a surviving spouse. These are examples of just some of the many pitfalls.
Then there is the need for providing financial statements over the last 5 years, the so-called “look-back” period. In the past, seniors would give away their money and property to qualify for Medicaid, and so the look-back requirement was created in answer to that practice.
This has placed an enormous burden on seniors, who now have to document their financial lives even beyond the scope of an average IRS audit! It also puts renewed focus on enlisting the help of financial planners who can help seniors strategically earmark funds for care earlier in life, so their loved ones are not burdened with the cost of their care years before Medicaid takes effect.
All of this sounds like a lot to tackle without help, and it is! As you can see, the complicated financial aspects of qualifying for Medicaid are often best handled by an expert. Through a combination of sound asset management and responsible long-term planning by a professional, the transition into Medicaid-sponsored care for seniors can be as smooth as it is reassuring.