1. Thinking it’s too late to plan. It’s almost never too late to take planning steps, even after you have moved into a nursing home. It does not matter whether you are single or married, have $40,000 in assets or $200,000 or more, there are many options for you to qualify for Medicaid to pay for long-term care costs. These options are usually still available even if you have been in a nursing home for years.
2. Giving away assets too early. It’s your money (or your house, or both). Make sure you take care of yourself and your spouse first. Do not put your security at risk by putting it in the hands of your children or others. Most people want to be in control of their property while they are alive and well. Premature transfers can cause difficult tax and Medicaid problems as well.
3. Ignoring important safe harbors created by Congress. Certain transfers are allowable without jeopardizing Medicaid eligibility. These include transfers: to disabled children, to caretaker children, into a trust for certain disabled individuals, or into a “pay-back” trust. Certain expenditures do not create a penalty situation such as home improvements, certain pre-paid funeral expenses, one vehicle and less than $1,500 in life insurance cash value.
4. Failing to take advantage of protections for the spouse of a nursing home resident. These protections include: the purchase of a spousal “pension” in the form of an immediate Medicaid qualifying annuity or promissory note, the transfer of assets to a “solely for the benefit of” spouse trust, or the petitioning the court for an increased community spouse resource and/or income allowance.
5. Applying for Medicaid too early. Applying while you are in a penalty situation, before complete asset spend down, or while you are in other situations may result in longer ineligibility periods.
6. Applying for Medicaid too late. By private paying nursing home expenses when you do not have to can mean the loss of many months of eligibility and leave less financial resources for your spouse or your family.
7. Not getting expert help. This is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars are at stake. It’s penny wise and pound foolish not to hire an attorney who makes their living guiding clients through the process. Often times it actually costs the family nothing since the amount paid to the attorney would have been spent anyway for nursing home care.
8. Confusion about property subject to estate recovery and property that is exempt. The current Medicaid recovery law in Michigan is on hold pending Federal approval, which was not given. This approval will most likely only occur after Michigan Legislature amends the law. As it is currently written, only certain assets may be subject to Medicaid payment estate recovery after the nursing home patient’s death. In many instances, re-titling assets during your lifetime may exempt the property from estate recovery.
By: Matthew M. Wallace, CPA JD
Published edited August 9, 2009 in The Times Herald newspaper, Port Huron, Michigan as: Avoid these 8 Medicaid mistakes