Top 5 Medicaid Planning Benefits You Should Know

Medicaid planning is the assistance a Medicaid planner provides to applicants to help them qualify and protect their assets and income.

It can be as simple as helping with preparing the application documents or more complex as involving financial restructuring.

It is particularly important if your assets and income exceed the Medicaid eligibility limit in your state.

Medicaid planning requires legal or financial expertise. It can be facilitated by a lawyer or a financial adviser.

There are different types of Medicaid planners you can work with from various practice areas, including elder law attorney, medical planning attorney, eldercare financial planners, geriatric care managers, and long-term care ombudsmen, etc.

Some offer their services for free, while others charge up to $15,000. Below is a look at the top 5 benefits of Medicaid planning.

1. Asset Protection

The Medicaid program considers your countable assets when determining if you qualify. Countable assets ate any assets that can be easily converted into cash.

These include life insurance, savings, trust accounts, annuities, real property apart from the excluded ones, vehicles, savings, certificates of deposits, etc.

Some assets are exempt as countable, including your primary residence, personal vehicle or any vehicle that helps you with medical care, funeral funds, and life insurance up to a face value of $1,500.

Countable asset limits to qualify for Medicaid vary across states. In some states, it is as low as $2000; in others, such as New York, it is up to $16,800.

California has a significantly high asset limit of $130,000 per applicant, and the limit is set to be eliminated in 2024 and beyond.

Long term care planning helps to protect your assets. Your planner will recommend the most appropriate strategy, depending on your circumstances.

The most common options include selling the assets and directing the lumpsum amount to an irrevocable trust or converting it into monthly income through annuities.

You may also gift the assets or use the “half loaf strategy,” whereby you gift some assets and use others in annuities.

Without proper Medicaid planning of your assets, you may not qualify for the health program.

If you do, the Medicaid Estate Recovery Program (MERP) will confiscate your assets after your demise towards reimbursement of your medical care costs.

2. Protects Your Income

Medicaid has stringent income eligibility criteria to ensure that only needy, low income families and individuals qualify. Similar to your assets, Medicaid looks at your income to establish if you qualify.

Income requirements vary from state to state. However, on average, the requirement is about $2,000 per individual. If your income exceeds your state’s stipulated limit, you will not qualify.

Medicaid planning helps you meet your income requirements. If your income exceeds the stipulated limit, a Medicaid planner can employ various strategies to ensure that your application qualifies while protecting your income.

The three most common strategies include spending down the excess income, qualified income trusts (QITs), and pooled income trusts.

Let’s say your monthly income is $3000 and the Medicaid income limit in your state is $2,200. You will have to spend down $800 to qualify.

If you are undergoing medical treatment or you live in a nursing home, you can spend down the surplus amount by paying some of your health care costs.

The spend down amount can also go towards transportation costs for medical care, home improvement to support your medical care or medical equipment such as eyeglasses or hearing aids.

If you cannot spend down the extra income, consider transferring your money to an irrevocable trust.

A QIT is also known as a “Miller Trust.” It is a type of irrevocable trust whereby you select a trustee. Your income is channeled to the trust, and your chosen trustee manages it.

Since the trust will own your income, it will not be considered when assessing your eligibility.

However, there are restrictions on what the income can be used for. The allowable uses include personal use, spouse allowance, and medical care.

It cannot be used to buy assets and, as it would increase your asset portfolio unless the asset is put in the trust.

Pooled income trusts are similar to QITs, in that they are irrevocable trusts where your surplus income can be diverted. However, only disabled people are eligible for a pooled income trust.

It works because income from several individuals is pooled into one trust managed by a non-profit organization that acts as a trustee.

The trustee disburses an agreed monthly amount towards expenditure payments for the trust members.

When a pooled income trust member passes away, any amount remaining in their trust goes towards supporting other people.

3. Helps You Pass the Medicaid Application

Medicaid has a 5-year lookback period in 49 states, apart from California, which is 2.5 years.

When applying for the Medicaid program, they not only look at your current income and financial status, but they also look back 5 years from the time of your application to establish if your financial situation is truly needy.

If you had gifted assets or money or sold some assets within the lookback period, your application may be denied or subject to a Medicaid penalty period.

The penalty period depends on the total value of assets transferred. It is determined based on how long the amount gifted or saved would have covered your nursing home costs in your county.

The lookback period aims to ensure that people who can afford to pay for their healthcare and nursing home costs do not sell or give away their assets and then seek help from the Medicaid program.

Besides helping you plan your income and finances to ensure you meet the eligibility criteria, a Medicaid planner can also assist you with the application process.

They will explain the eligibility criteria and guide you through the application step.

They will advise on the documents required, such as birth certificates, paycheck stubs, income reports, bank statements, evidence of assets owned and their value, and if you are signed up for other government benefits.

Your planner checks your application before submission to ensure that all the relevant information is included and correct. In case your application is denied, they may help you to appeal.

A Medicaid planner can also save you time if there is a likelihood that you won’t qualify for the program.

If they assess your circumstances and determine that it will be difficult for you to qualify for Medicaid, they will advise on ways to manage your assets and income to ensure to better plan for medical care in your senior years.

4. Ensures That in the Case of Long Term Nursing Care, Your Health Costs Are Taken Care Of

Most people underestimate how much long term nursing care can cost. Even for middle or upper-class families or individuals who have saved a significant amount towards their health care in old age, nursing home care costs can quickly wipe out their savings. Keep in mind that Medicare does not cover nursing home care costs.

Therefore, with Medicaid in place, you are assured of long term care while ensuring a legacy for your family. Depending on your eligibility, you can qualify for in-home care, assisted living, and nursing home care.

Don’t wait until you are sick or have to apply for Medicaid to start planning for it. The best time to seek the services of a Medicaid planner is at least 5 years before applying while still in good health. Incorporate as part of your estate planning.

5. Protects Your Spouse Financially

When one spouse lives in a nursing home care, it can strain the couple’s overall resources or the other partner’s income.

For instance, you need to protect the family home as the primary residence for your partner, ensuring that the Medicaid Recovery Program does not repossess it.

If your income exceeds your application limit, you can put it in an irrevocable trust and appoint your spouse as the trustee. Or the surplus income may be allocated as a resource or income allowance for your partner.

You may also benefit from spousal transfer or refusal. Spousal transfer works such that any assets you transfer to your spouse are not subject to the lookback period. This approach works if one spouse needs Medicaid while the other does not.

On the other hand, New York and Florida Medicaid permit spousal refusal. Whereby the spouse who is well refuses to support the sickly spouse rendering them eligible for the Medicaid program.

Conclusion

If you are applying for Medicaid for the first time and are unsure if you are eligible, consider seeking help with medical planning.

Seeking a Medicaid planner’s help improves your chances of getting accepted to the Medicaid program.

Application into the program can be complicated, and a Medicaid planner helps you structure your finances to qualify.

They can also help with the time-consuming application process. Medicaid planning also helps to preserve your family assets from the asset recovery program.