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Preparing for Medicaid and Long Term Health Care

Preparing for Medicaid now to avoid the "lookback" period --

There are common strategies for protecting assets from Medicaid and Long Term Health Care.  It is legal to transfer assets prior to Medicaid under the federal Deficit Reduction Act of 2005.  These regulations are state-by-state for governing law.  There are restrictions for transfer and severe penalties for violation.  The Deficit Reduction Act outlines the states responsibilities and requires the states to outline their restrictions.

Though the federal government funds Medicaid, the states are permitted to outline and employ some of the requirements.

Many people think of this as nursing home protection.

There is a Medicaid “lookback” period.  This period is for 5 years for all transfers from the date of transfer.  The old “lookback” period was 3 years.  The new federal law applies to all transfers made on or after the date of enactment, February 8, 2006. Any transfer made before February 8 falls under the old transfer rules. Exact enactment provisions are state by state, but it's clear that non-compliance by 50 state legislatures puts their federal funding at risk.

Medicaid is long-term care not to be confused with Medicare, which is a system for short-term disability and health care.  Medicare is only required to pay benefits for ninety days before Medicaid takes over.

If a person acts within the lookback period, the assets of the transaction will be vulnerable to Medicaid garnishment.  There are several methods involving life insurance, annuities and trusts.

If a person acts in time to transfer the assets into an irrevocable trust with an independent trustee, the assets will be protected from Medicaid.  The key is in the status of the trustee.  The trustee must be truly independent and cannot be a relative of any type.  The beneficiary must give up complete control of the assets.  Many people, no matter how much they want to cannot give up the control of their assets.  The trustee must protect and diligently invest under the prudent rules of the trust deed. The courts do not look favorably on dereliction of duties while serving as trustee. An irrevocable trust is the only significant asset protection device for avoiding the Medicaid spend-down provisions.

Medicaid moves very quickly to garnish assets.  The process is well documented and if a senior has not moved in their benefit, Medicaid will have the right to the assets, with very few exemptions; some states offer better protection then others.  Medicaid will require seniors to use all of their liquid assets first and then they will file for the assets that are not under exemption even potentially against the surviving spouse.

You must consult an expert with knowledge of your state limitations.  Annuities and trusts must have proper titling and meet the state requirements.

If you do not have Medicaid protection, we would be happy to consult with you and analyze your options.  The call and analysis is of no cost to you.
 

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