Medicaid is an incredibly complicated program with provisions that render even the most experienced attorneys perplexed. The bottom line is this: Medicaid exists to provide funding for long term care, most of the time nursing home care, to those unable to pay for themselves. The complications arise when attempting to qualify for receipt of Medicaid benefits.
First, there is currently a five-year look-back period during which no transfers of assets can be made without risking a disqualification period. For example, let’s say that Jane Smith has $50,000.00 in the bank and this constitutes her life savings. Jane worked very hard for this money and wants to pass it on to her loved ones. Now in her late eighties and with failing health, she foresees a nursing home stay and wants to make sure the money is protected. To this end, she writes five checks for five thousand dollars each and gives them to her children and grandchildren. Three years later, Jane goes to a nursing home. After spending what little money she had left on the $12,000.00 per month facility, she applies for Medicaid and is told that she will be ineligible to receive Medicaid benefits for almost three months because of the checks she wrote to her children. So who will pay for her nursing home care for those three months?
Second, in order to qualify for Medicaid, a single person can have only $2,000.00 in their name. This does not necessarily mean that all money in excess of that amount must be given to the nursing home. There are ways that money can be spent without jeopardizing eligibility for Medicaid. For example, money can be spent to pre-arrange funeral plans. Another option might be funding a particular kind of annuity. This is a way to potentially save a large amount of money. These things can be done within the five year look-back period. In other words, Jane could have used $10,000.00 to pre-arrange her funeral without losing Medicaid benefits. This would also prevent her children from having to pay for her funeral with their own money.
Many times, people are most concerned with protecting their home. Again, we often encounter clients who want to just transfer the house to the kids. This is a bad idea for many reasons, one of which is that it could result in a very long disqualification period. Even a modest home could result in years of disqualification if transferred within the five year period. But the home CAN be transferred within the five year period with no disqualification in certain situations. For example, the home could potentially be transferred to a child living in the home who meets certain standards for taking care of the parent. Further, if it looks like the five year period will not be an issue, then the house can be transferred to an irrevocable trust or, if appropriate, transferred outright to a child. Transfers to children are generally not a good idea for many reasons, but if all parties are advised of the risks and tax consequences, it may be appropriate.
Finally, many times, even when everything is done correctly, MassHealth, the entity in Massachusetts that administers Medicaid, will reject an application anyway. Whatever the reason, someone will have to appeal the decision and advocate why the decision was incorrect. A lay person with little knowledge of the Medicaid regulations will likely have a tough time winning such an appeal. A seasoned attorney, on the other hand, will have been in such a situation numerous times and know both the procedure and the regulations very well. This could be the difference between staying in the nursing home and getting evicted.
As you can see, Medicaid is a very complex program. While laudable for its ultimate purpose of providing long-term care for those who would not otherwise be cared for, it does so in a manner that strips its participants of assets earned over an entire lifetime. Proper planning with a knowledgeable attorney can save these assets for future generations.
Attorney Michael Coleman earned his Juris Doctor degree from Hofstra School of Law. He is also a member of the American Academy of Estate Planning Attorneys and the National Academy of Elder Law Attorneys, Inc. Attorney Coleman focuses his practice on various estate planning, estate administration, probate, retirement planning, and real estate matters. Lantz Law, Inc. has served the communities of Southcoast, South Shore, Cape Cod, and the Islands since 1969.