The Top 8 Medicaid Planning Mistakes People Make

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One of the greatest fears of older Americans is that they may end up in a nursing home; simultaneously incurring a great loss of personal autonomy, and a tremendous financial price. And, with elders living longer than ever before, chances are that most of us will either know someone in a nursing home or eventually have to enter one ourselves.

Depending on location and level of care, nursing homes in the New York area can cost between $136,000 and $180,000 per year. Unfortunately, Medicare will not pay for long-term nursing home care, which places the financial burden on elders and their families. Many nursing home residents will run out of money within the first year, while others will see their life savings depleted when faced with a prolonged stay. This same scenario can occur when hiring in-home care. But there is another option—Medicaid planning.

Proper Medicaid planning rearranges your finances so that countable assets are exchanged for exempt assets (or otherwise made inaccessible to the state). This allows you to have Medicaid pay for the same level of quality care, without draining all of your resources. But you can't plan alone. Elder Law attorneys aren't just for seniors, and we recommend seeking out an Elder Law attorney who has experience and expertise in Medicaid planning.

Top 8 Medicaid planning mistakes

  1. Thinking it's too late to plan: It's almost never too late to take planning steps, even after a senior has moved to a nursing home.
  2. Giving away assets too early: Don't put your security at risk by putting all of your assets in the hands of your children. Remember, it's your money (or your house, or both). Make sure you take care of yourself first. Precipitous transfers can cause difficult tax and Medicaid problems.
  3. Ignoring important safe harbors created by Congress: Certain transfers of assets are allowable without jeopardizing Medicaid eligibility. These include: transfers to disabled children, caregiver children and certain siblings. You can also transfer assets into regular trust for anyone who is disabled and under age 65; into a "pay-back" trust, if under age 65; or into a pooled disability trust at any age.
  4. Not using built-in protections for the spouse of a nursing home resident: These protections include the purchase of an immediate annuity, petitioning for an increased community spouse resource allowance, and (in some instances) petitioning for an increased income allowance or refusing to cooperate with the nursing home spouse's Medicaid application. Learn more about Medicaid spend-down rules for spouses.
  5. Applying for Medicaid too early: This can result in a longer ineligibility period in some instances and can cost you thousands of dollars.
  6. Applying for Medicaid too late: This can mean the loss of many months of eligibility, and deplete assets and life savings that you may have wanted to save for your spouse or family.
  7. Not getting expert help: Medicaid planning is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars are at stake. As with any important decision in life, it's vital to be well informed. Consult an Elder Law attorney who has experience and expertise in this practice area.
  8. Confusion about the difference between lifetime liens on property and estate recovery: There are a number of exceptions to lifetime liens on property, but for estate recovery there is only a deferral for a surviving spouse and a hardship waiver.

Brian A. Raphan is the founder and lead attorney of The Law Offices of Brian A. Raphan in New York, MY. His blog "Elder Law News" covers timely legal news facing New Yorkers and he frequently gives pro bono lectures on legal matters facing the elderly.

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7 Comments

As has been pointed out by 'Moomoo', " like all agencies they are expensive." It has always been the case, especially in the legal arena. I am at the point, are every near, of just saying the h*ll with it, just take it all.
Mother has approx. 120k in IRAs, annuities, Certificates of Deposits & cash assets in Life Insurance. That is not wealthy by any standard, especially in this day and age. Yet the guidelines for Federal Assistance limits state 'no more then $2,000.00 in cash and assets. Attorneys want $250.00 per hour and a $2,000.00 retainer (escrow) to even 'represent the elder person'. With her Dementia taking it's toll, and her wishes to 'not give it all to the government; I want you kids to have most of it. I've worked all my life, saving what could be saved, lived very meagerly..only to have the government take it ALL.'
It's a shame that the sharks (lawyers) muddy the waters in their feeding frenzy, while the buzzards (government) circle over the land waiting to take advantage of creatures (humans) that are less able to defend themselves as the final days of their lives draw nigh.
It is a sad state of affairs, when we are born 'free' and taxed to death. Yet this country, the United States of America would rather give aid to everyone on earth EXCEPT it's own people.
I'm getting off my 'soapbox' now... because this just continues to eat at my soul.
May the Deity give us all the strength, compassion, understanding and comfort we need to survive the trials of this life.
I'm in the process now applying for Medicaid for my mom who recently entered a nursing home for short term care but it seems like it's going to be long term and the 20% can be outrageous,like 150.00 per day and my mom is only receiving 1,200 per month from SSI and has worked her entire life and she really has no assets to fight over, she has a mobile home that is in a living life estate made out to me( her son) for reasons such as this and homestead act which all this was done years ago. I had a lawyer do it and register it at the town hall where she lives and the taxes come every year and my name is on them but she still gets the benefits from my Dad who was a Veteren of WW2 and she never lost any of her assistance. I live in another state but I have been basically the only one helping her since my dad passed 6 years ago. All I really care about is my mom getting better and I believe I am doing whats right from what I've been told since I've talked to more people then I can count who have been through this situation which is the hardest thing I have ever done. I am disabled myself and have been for 10 years so it's been a nightmare. I pray fro anyone that is going thought this, god bless
Good but I wish I was a Millionaire!