Founder
The Medicaid program can help make long-term care affordable for individuals who need it. However, the program imposes strict financial eligibility criteria that many Americans would not meet without careful financial planning. Although many people may assume that only low-income individuals can qualify for Medicaid, various legal strategies can help many others qualify for benefits, making Medicaid planning essential.
What Is Medicaid Planning?
Medicaid planning seeks to arrange an individual’s or a married couple’s finances to ensure that the individual or couple can qualify for Medicaid benefits to avoid spending all their assets on long-term care, such as home health services or nursing home care. Medicaid has strict financial eligibility criteria: an applicant cannot have assets or a monthly income above specific thresholds. Medicaid planning ensures that an individual’s or a couple’s assets and income meet these criteria. For this reason, seniors, individuals with severe chronic health conditions, and people caring for spouses may need to undertake Medicaid planning to qualify for benefits.
Why Medicaid Planning Matters
Long-term care can have a significant financial effect on a family. Home health care, assisted living, or nursing homes can cost tens of thousands of dollars per year, quickly draining an individual’s or a couple’s savings or putting a significant strain on their family’s finances. As a result, many people who need long-term care turn to Medicaid to cover most of their costs. However, many people have assets and income that would disqualify them from Medicaid, making advanced planning necessary to meet the eligibility criteria.
Waiting too long to begin Medicaid planning may risk losing effective legal options, as Medicaid has a five-year lookback rule that counts certain assets transferred within five years of a Medicaid application as part of an applicant’s assets. Furthermore, advanced planning can provide individuals and families with peace of mind in knowing that Medicaid benefits can help pay for long-term care if and when it becomes needed.
Key Elements of Medicaid Eligibility
The main elements of Medicaid eligibility rules include:
- Income Limits – In most states, a Medicaid applicant cannot have a monthly income exceeding 138 percent of the Federal Poverty Level. However, different rules may apply to certain seniors or individuals with disabilities. Special rules also apply to married individuals, as Medicaid may count a spouse’s income.
- Asset Limits – Individual applicants cannot own more than $2,000 in countable assets. However, countable assets may exclude specific property, such as a primary residence, one household vehicle, personal items (e.g., clothing, household goods, wedding rings), and burial funds.
- Lookback Rules – Medicaid treats non-qualifying transactions that occur within the five years before a person applies for Medicaid benefits as a penalty, which can delay an individual’s receipt of Medicaid benefits.
Common Medicaid Planning Strategies
Some of the most popular Medicaid planning strategies include:
- Spend-Down Strategies – Medicaid rules allow applicants to spend money on certain qualifying expenses, such as home repairs, home renovations to install disability accommodations, medical equipment, and prepayment of funeral/burial expenses.
- Medicaid Asset Protection Trusts – Individuals may place assets into an irrevocable trust, which helps their countable assets fall below the eligibility limits. However, transfers to trusts may violate the lookback rule, making advanced planning with Medicaid trusts essential.
- Gifting Strategies – Although specific gifting strategies allow Medicaid applicants to pass certain assets to loved ones while still qualifying for benefits, transfers must comply with Medicaid rules, including the five-year lookback rule, to avoid triggering penalties that may delay benefits.
- Spousal Protections – Medicaid regulations allow an applicant’s healthy spouse (the spouse not needing long-term care) to keep certain assets and income to ensure they have sufficient financial resources for their living expenses, without disqualifying the other spouse from Medicaid benefits.
Contact a Medicaid Planning Attorney Today
Advanced planning can help you or a loved one qualify for Medicaid benefits to afford the cost of long-term care. Contact the Law Office of Angela Siegel today for a free initial consultation with a New York estate planning lawyer to learn more about what to expect when developing a legal strategy to ensure your or a loved one’s eligibility for Medicaid benefits and to protect your family’s assets.