Medicaid Planning Mistakes That Could Cost Your Legacy
For many elderly citizens, Medicaid is a vital source of payment for long-term care. However, the Medicaid qualifications are complicated, and any error could cause delays, penalties, or the improper expenditure of resources. Proper planning is vital if you are to successfully protect your legacy while still receiving the care you need.
Misunderstanding the five-year lookback rule
One of the most common and costly errors involves the Medicaid five-year look-back period. Once an individual applies for Medicaid, the state will review all financial transactions from the past five years. Any gift given for less than fair market value within the five-year time period will cause a delay in your eligibility. Many families think that by giving their assets to their children or grandchildren, they will qualify for Medicaid benefits more quickly. In actuality, the five-year delay will occur when the patient needs care the most.
Waiting too long to plan
A second common error is to wait until a health crisis occurs to begin planning. The best time to engage in Medicaid planning is before a crisis occurs. Crisis planning is still an option, but it is much more difficult.
By beginning the planning process early, families can investigate legal means of protecting their assets, protecting a spouse remaining in the home, and providing ongoing care without causing unnecessary financial loss.
Improper use of joint accounts
In many cases, joint bank accounts are established for practicality’s sake but can create problems when the Medicaid application process is initiated. The funds within a joint bank account can be viewed by Medicaid as entirely at the disposal of the applicant, even if some of these funds are technically owned by another party.
Properly naming accounts and clear ownership are key to avoiding this problem.
Failing to protect a healthy spouse
When one of the spouses is in need of long-term care, the other, or “community spouse,” has certain rights under Medicaid law that are meant to prevent the community spouse from becoming impoverished.
If spousal rights are not protected, such as through resource protection and income protection, the community spouse can be put in a precarious financial position. An elder law attorney can help arrange the assets and income in a manner that satisfies Medicaid rules but also protects the community spouse who remains in the home.
Overlooking estate recovery
Many families are unaware that Medicaid has the right to collect from the estate after the death of the Medicaid recipient. This is called estate recovery. The home and other assets that the family had planned to leave to heirs can be subject to Medicaid’s claim if no estate planning was done.
Strategic planning can help eliminate the estate recovery issue.
How an elder law attorney can help
Medicaid planning is not about “hiding assets” or “cutting corners.” It’s about using the rules. An experienced elder law attorney can help identify areas of risk, create a plan, and guide you and your family through the application process. With proper legal guidance, you can protect your assets, reduce your stress, and provide for your long-term care needs without compromising your estate plan.
Talk to a Virginia Beach, VA, Estate Planning Lawyer Today
The Law Office of Angela N. Manz represents the interests of Virginia Beach residents who are looking to draft or update their estate plan. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin the process right away.