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Life Care Planning Reed: Mistakes in Medicaid planning

Sandra W. Reed
Sandra Reed

Jennifer Coulter and Jessica Kludt, elder law attorneys practicing in El Paso, outlined in a presentation last fall of frequent mistakes made in planning for obtaining Medicaid benefits for long-term care. If you anticipate a family member may need nursing home care in the future, please discuss qualifications for Medicaid with an elder law attorney to avoid the mistakes they noted.

• Mistake No. 1: Failure to provide a sufficient Statutory Durable Power of Attorney that gives the powers to the agent necessary for the circumstances of the principal involved.

• Mistake No. 2: Failure to draft the will with provisions, such as a trust, that takes into account the need to qualify for benefits.

• Mistake No. 3: Selling the homestead, thereby converting an uncountable asset to a countable one and thereby disqualifying the applicant for Medicaid.

• Mistake No. 4: Placing the homestead into a trust instead of leaving it in the applicant’s ownership, thereby converting an exempt asset into an asset that will prevent qualification for Medicaid.

• Mistake No. 5: Making gifts within five years prior to applying for Medicaid, creating a waiting period that could delay qualification entirely if the gifts are sufficiently large.

• Mistake No. 6.: Co-signing with children or grandchildren on notes to allow those without sufficient credit to purchase their homes, creating a disqualifying asset under Medicaid rules.

• Mistake No. 7: Not understanding the use of a qualified income trust (QIT), also known as a Miller Trust, to qualify an applicant whose income is over the amount allowed for qualification for Medicaid.

• Mistake No. 8: Using a QIT or Miller Trust for Medicaid programs other than the Nursing Home Medicaid and 1915c Waiver Programs.

• Mistake No. 9: Putting assets into a QIT or Miller Trust to attempt to reduce countable assets when only income can be placed into this type of trust to qualify for Medicaid.

• Mistake No. 10: Couples spending down needlessly to the $3,000 asset level without taking advantage of the spousal impoverishment and other applicable rules for additional retention of assets allowed for the stay-at-home spouse.

• Mistake No. 11: Failure to avoid probate of noncountable assets by devises, such as a Ladybird Deed to take the homestead out of the estate, since Medicaid can recover what it paid out in benefits only from estate assets.

Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives in beautiful Chalk Mountain and can be reached at (254) 797-0211; (817) 946-2809 or at sreed@kbzlaw.com.