Medicaid planning is a crucial process for many seniors and their families, especially when it comes to managing the financial aspects of long-term care. Proper planning can help ensure that you or your loved one receives the necessary care without depleting life savings. However, the process is fraught with potential pitfalls. Read this blog to learn more about the most common mistakes made during Medicaid planning and how to best avoid them.
The Seven Most Common Mistakes in Medicaid Planning
1. Procrastination
One of the most common mistakes in Medicaid planning is simply waiting too long to begin. Many families delay planning until a health crisis occurs, which often results in hasty decisions and missed opportunities for strategic asset protection. Early planning allows for a broader range of options and a better chance of meeting Medicaid’s eligibility requirements. It is never too early to start thinking about the future, and initiating the planning process sooner rather than later can alleviate a great deal of stress down the road.
2. Gifting Assets Incorrectly
Another frequent error involves improper asset transfers. Many people mistakenly believe they can quickly transfer assets to family members to meet Medicaid eligibility requirements. However, Chronic Care Medicaid has a five-year look-back period, which means any gifts or transfers made within five years of applying can result in penalties. These penalties can delay eligibility and create financial strain. It is crucial to understand the rules governing asset transfers and to seek professional advice before making any significant financial decisions.
3. Failing to Understand Medicaid’s Asset Limits
Medicaid has strict asset limits that applicants must meet to qualify for benefits. Many individuals fail to adequately plan for these limits, often because they do not fully understand them. Single chronic care Medicaid applicants typically must have no more than $31,175 (for 2024) in countable assets, while married couples face different criteria depending on whether one or both spouses need care. Misunderstanding these limits can lead to ineligibility or the unnecessary spending down of assets that could otherwise be protected.
4. Overlooking Income Planning
Income planning is another critical aspect that is often overlooked. Medicaid not only considers your assets but also your income. Different states have various income limits, and exceeding these can disqualify you from receiving benefits. In some cases, pooled income trusts, can, and often should be used to help applicants meet Community Medicaid income requirements. Failing to plan for income can result in unnecessary expenses.
5. Not Seeking Professional Help
Perhaps the most significant mistake is attempting to go through the Medicaid planning process without legal representation. The regulations surrounding Medicaid are intricate and frequently changing. An experienced Rochester elder law attorney can provide invaluable guidance, helping to ensure that all aspects of the application and planning process are handled correctly. Professional advice can prevent costly mistakes and help protect your assets for future generations.
6. Failing to Understand Different Medicaid Programs & Rules
Chronic Care Medicaid planning is recommended when a loved one is in, or heading into a nursing home, or planning to avoid having assets available to pay for long-term-care costs in a nursing home. Community Medicaid is a program to reduce in-home care costs, to cover drug and physician co-pays and for a reduction in room rates in certain approved assisted living facilities. Often clients mix the exemption limits and criterion in applying for Medicaid because they simply do not know or understand the Medicaid rules for each program.
7. Allowing the Nursing Home to apply for Chronic Care Medicaid
Over and over, I see nursing home representatives applying for Chronic Care Medicaid on behalf of its resident only to have the resident receive a denial of Medicaid benefits, and the 6-12 months it took to receive the denial, now is costing the client the private pay rate for the entire 6-12 months. Now you are paying an attorney to “fix” the problem and “fixing” the problem is causing the attorney more work (and expense for you) in addition to potentially owing the 6-12 months of nursing home care at the private pay rate (not the Medicaid rate because you received a Medicaid denial).
