Editor's Note: The following is part 3 of an online series for National Sandwich Generation Month, aimed at bringing support and awareness to those families sandwiched between raising their kids and caring for aging parents.
When exploring your parents' eligibility for Medicaid, it's important not to overlook any rules that may disqualify them from coverage. Again, many states have a “look back” policy which could result in penalty periods or disqualification, and missing this important piece of information could be detrimental.
For those that have already started the process of applying for Medicaid, there are many pitfalls you can avoid. While not an exhaustive list, below are some of the most commonly made mistakes families encounter when trying to meet Medicaid's income and asset qualifications.
# 1: Making Gifts and Giving Away Assets
Many seniors ask if they can just give away assets to their loved ones as an alternative to having them absorbed by the costs of long-term care. However, precautions must be taken in order to avoid serious penalties, ineligibility, or worse, charges of fraud. Giving away assets to loved ones during
Medicaid's “look back” period may delay or jeopardize your parents' approval, or could even be seen as “fraudulent,” leading to them having to repay any benefits already received. Medicaid views all transfers of assets intently, but a reputable estate or elder law attorney can help you navigate the laws surrounding this issue and avoid any unintended consequences of gifting assets.
# 2: Ineffective Trusts
Not just any trust can be used to protect assets for Medicaid purposes. This is a huge misconception and even Revocable Living Trusts can easily expose your parents' wealth to long-term care costs and creditors. Only Trust documents that have the proper provisions for protecting assets, such as certain Irrevocable Trusts, are sufficient for making assets unavailable for Medicaid purposes. It is important to fund an Irrevocable Trust with enough time to protect your parents' assets from the look back period, but it's also crucial to start the process before your parents become incapacitated or otherwise unable to make legal decisions. This planning step can be tricky, so it's important not to go it alone. You'll want to use the services of an elder law attorney (not just a general will and trust lawyer), as they focus on this type of advanced asset protection planning for seniors.
# 3: Missing Out on Exempt Transfers
There are certain asset transfers are entirely legal for Medicaid Purposes, and very few seniors know how to take advantage of what's available to them. For example, under current laws a senior can pre-pay their entire funeral without penalty. If your family didn't know this, you may still be trying to “spend down” all of mom or dad's remaining assets on their care without taking advantage of the opportunity to pay for end-of-life expenses that the family will ultimately be burdened with. To ensure you are keeping as much of your family's wealth and inheritance as possible, talk to your attorney about asset exemptions that may be available to you.
# 4: Unnecessary Spend Down
Medicaid absolutely has strict income and asset limitations that must be met in order to qualify for benefits. What is not common knowledge, though, is that there are no black and white ways to arrive at these numbers! For example, if your parents have unreimbursed medical expenses, these costs can be used to lower what is considered to be their “countable and non-countable assets.” Many families believe that everything must be spent down to $2,000 in order to qualify for Medicaid, when in fact their loved ones may actually qualify for Medicaid earlier (and with more money in the bank) than they thought thanks to “gray area” calculations. In order to avoid making this and other mistakes, talk to a professional who can help assess your specific situation and crunch the numbers to determine what it will take for you to qualify. This is a powerful step in preserving assets and income revenues that you may have overlooked.
# 5: Not Exploring In-Home Benefits
If your parents wish to stay in their home, they may be eligible to receive assistance from Medicaid, Waiver Programs, the VA (for wartime veterans) and State programs. These programs have eligibility requirements similar to, yet distinct from Medicaid. An experienced elder law or estate planning attorney can help guide you through the similarities and differences in these requirements. However, it is important to note that even with these added benefits, the amount of care these programs provide may be less than the care needed.