I was recently asked what are the biggest mistakes people make in doing strategic planning for Medicaid eligibility. There are actually quite of a few missteps that can cause a family headaches, and then heartache. Let's start with the first three:
First is simply failing to do any planning. Biggest mistake by far. I know that we humans have a real struggle accepting the things ahead of us that we don’t really like. “I don’t want to talk about it” and “I don’t want to think about it” are the two most popular answers I get when I ask about planning that people haven’t done. The problem with this thinking isn’t that there is no plan in place, there is. You just may not like it.
There are always two types of plans – the one you get by design and the one you get by default. The default plan is the one that the government has put together for you, well not you specifically, you in general. This plan will pay for your long term care, that’s not the problem. The problem is that this plan is the most expensive plan for you. We call it Medicaid. It pays for over one-half of all long term care in the United States. The cost to you is simply everything you own. You can qualify for Medicaid benefits when the value of your assets is less than $2000. (Your income needs to be less than about $2200, but there is a way to make it work if your income is higher.) So Medicaid simply anticipates you will spend everything you own on your care until you have nothing, then you’ll either be dead or you’ll qualify at that point. Either way, if you had in mind to preserve assets for the non-Medicaid spouse (or for the children) there just won’t be much left.
The second biggest mistake is akin to the first. Instead of failing to do any planning, many, many people wait until it’s almost too late to do any planning. While the truth is that it’s probably never really too late, the later in the process you begin the planning, the fewer the options you have available to you and the more money you’ll spend until you are eligible. The Medicaid program has many exemptions and many strategies available to preserve a few assets from the non-Medicaid spouse (and even the kids). However, it takes time to make most of those strategies work. So, the longer you wait, the more cash out of pocket it takes to qualify.
If you start at least five years in advance, you have many, many options and can protect almost all of your assets. If you call tomorrow and tell me you need Medicaid benefits on Monday, I’ll still be able to help, but you just won’t like what it takes at that point to qualify. So the sooner you plan, the better your plan and the happier you’ll be.
The third biggest mistake is trying to do complicated Medicaid planning by yourself. Here in the Intermountain West, we are the biggest group of do-it-yourselfers around. We’ve learned a thing or two about being self-reliant and helping out our neighbors. The challenge, however, is that this type of planning is complicated and so much can go wrong. A gift of the house to the kids for example, renders what would have been an exempt asset (you can qualify while owning a house) into a non-exempt asset and now Medicaid will impose a penalty period – a period of time that you’ll receive no benefits from Medicaid, even though you might not have any money left.
You can avoid all of these problems by starting a plan now with a professional. I'd recommend contacting us, and we can help you decide what your next steps should be. Don't wait, plan now!