Reed: Medicaid planning starts right now
By Sandra W. Reed
Following his operation to remove a brain tumor, Rick, a widower, was expected to live no longer than six months. That was 10 years ago.
Anticipating that early death, he did nothing to plan for long-term nursing care and made a will leaving his estate of more than a million dollars to his three children.
When Rick had to enter a nursing home five years ago, he sold his residence. Rick has paid for his care through retirement savings and the proceeds from the sale of his house. Now he has no assets left and is faced with applying for Medicaid to pay his nursing home bills. Could planning have saved part of Rick’s estate for his children?
Medicaid qualification exempts certain assets
To qualify for Medicaid an applicant must have no more than $2,000 in countable resources. However, Medicaid does not count an applicant’s homestead as a disqualifying asset. Rick could have kept his home and still have qualified for Medicaid to pay for his nursing home care. He could have executed a Ladybird deed giving a life estate in it to his three children while retaining the right to sell it during his lifetime. This would have taken the home out of his estate, exempting it from being recovered by Medicaid as reimbursement for his care.
Gifting as a planning tool to preserve assets
Medicaid rules provide a penalty for gifts given during the five-year period prior to qualification for Medicaid. Rick could have given cash gifts to his children each year from the time that he had the brain tumor to the present. The gifts he gave them during the first five years would have created no penalty at all. The gifts he gave the children during the five years just prior to his application to Medicaid would have delayed his qualification date. However, Rick could have consulted a lawyer who would have advised him how the rules allow the retention of 40 to 60 percent of the amounts he gave the children the last five years.
Preservation of assets planning tools for couples
Had Rick’s wife been living, the couple would have had even more tools to access for preserving assets while applying for Medicaid. Singles and couples should consult an attorney with expertise in the field to learn how they can protect assets while seeking Medicaid benefits.
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. She can be reached at 254.797.0211; 817.946.2809 or by at firstname.lastname@example.org.