Many people assume Medicare will pay for long-term care if they need it in the future. They are surprised to learn that the cost of this care falls on them. Planning for the future helps ensure they have the care they need.
People who receive Medicaid to pay for this care must carefully plan for their assets. The program has strict asset and income limits, so asset planning while on Medicaid is essential to cover the necessary services. A person must work with the program’s constraints if they depend on the safety net for care coverage.
Asset Planning
Medicaid has resource limits in place. Most people using the program can have no more than $2,000 in countable assets to remain eligible for coverage. Married couples are permitted to have $3,000. Each state determines its limits and exempts certain assets.
For example, a person might have a primary residence if equity restrictions are met. People on the program can have one vehicle and their personal belongings and household goods. People can plan for their funeral and burial without worrying about how this will impact their eligibility. With this information, a person can undertake asset planning.
However, a person must know which items are counted as assets. Bank accounts, cash on hand, real estate, and other assets will be counted. A person should maximize their exempt assets wherever possible. For example, they may improve their home and convert their cash into home equity, which is usually exempt. They might also purchase items for the house or prepay funeral expenses and maintain eligibility while making wise financial decisions.
Special Needs Trusts
A person might set up a special needs trust as part of their Medicaid asset planning. Another person can pay for the Medicaid beneficiary’s supplemental needs while ensuring they remain eligible for the government program. The funds in this trust can be used for expenses not covered by Medicaid. A person might even be able to establish this trust themselves without affecting eligibility, although they should consult a lawyer before doing so.
Spending Down
Many people reduce their countable assets to meet the program’s eligibility requirements. They may pay off debts or purchase exempt assets. These expenditures must have legitimate purposes or they will be considered improper asset transfers and impact eligibility.
Look-Back Period
Asset transfers made within five years of applying for Medicaid may impact eligibility. The program examines whether these transfers were made for less than fair market value. If they were, the person might not be eligible for Medicaid or would need to wait a certain period before applying. To avoid this issue, people need to plan for long-term care services years before they might be needed.
Income Streams
People want to ensure they have funds for expenses not covered by Medicaid. They need sufficient resources for these daily living expenses. Certain types of income count toward Medicaid limits, so a person must know which income streams to pursue and how to manage these streams.
Family members can help in asset planning for Medicaid, but many people find they need the help of a third party to ensure this process is handled correctly. These professionals help individuals and their families identify opportunities and avoid common pitfalls while remaining within the law. In addition, the person must regularly review their assets to ensure they remain eligible for the program as rules change. A person’s life circumstances may also change and impact their eligibility. Updating planning strategies regularly is the best way to avoid issues.
