No one really wants to depend on Medicaid benefits, especially because people associate them with poverty, despite it being a critical safety net for those who need medical care. If you have worked your entire adult life, you have probably always had private insurance. After retirement, you may have thought that Medicare coverage would be all that you would need for the rest of your life.
Unfortunately, both private insurance and Medicare have limitations that leave aging adults vulnerable when they experience significant medical issues. Long-term care is often not part of basic health insurance or Medicare coverage. If you need nurses to come out to your house to take care of you or if you need to move into a nursing home, you will either have to pay out-of-pocket or qualify for Medicaid.
Qualifying for Medicaid will often mean spending most everything you own, other than the equity in your home, before you can apply. Planning now to qualify for Medicaid later can protect your assets and make it easier for you to get benefits when you need them.
What does Medicaid planning usually involve?
To qualify for Medicaid, your income and overall assets must be beneath a specific threshold. To help people qualify easily, it is usually necessary to diminish their personal belongings.
People can do this through strategic giving to others, changing the ownership or deed for major assets or creating a trust. All of these steps will potentially diminish what assets a person has in their name and make it easier for them to get Medicaid benefits. However, Medicaid will go back over your financial records to make sure you haven’t hidden something from them.
Transfers within five years of applying can result in a penalty
Whether you gave a gift to your child or move your home into a trust, if you did it shortly before applying for Medicaid, the government will likely expect you to pay the full value of that gift or transfer out of pocket before they cover your care.
The 5-year or 60-month Medicaid look-back period serves to prevent abuses of public insurance. To avoid triggering penalties, you need to think about planning for Medicaid long before you would probably need it. The sooner you do, the greater peace of mind you have about your medical insurance options and the legacy you want to leave behind when you die.