Much like estate tax planning was critical to clients over 10 years ago, I find that now long-term care planning is paramount for many people I meet. With the increase in our longevity, we must think about the cost of long-term care, which, frankly, has been skyrocketing over the last few years with no end in sight.
Outliving Your Assets
Many clients that come to see me are concerned about outliving their assets. They want to be able to qualify for public benefits assistance should they need long-term skilled care, but they are concerned that they will have to spend down all their assets to do so.
I like to sit with clients and try to navigate that process and assist them in protecting what assets they can while still ultimately qualify for benefits that they may need. It’s easy to procrastinate in your planning, but it’s critical to begin planning for your long-term care well in advance.
Five-Year Look-Back Period
To be eligible to be cared for in your own home, or a nursing or assisted-living home from Medicaid, you must have limited income and assets. That’s because in 2006, the federal law changed, creating a five-year look-back period as it relates to Medicaid planning. A Medicaid eligibility worker can review information and gifts and transfers that are made within the past five years of someone applying for Medicaid, so it is critical when doing any trust or gifting types of plans to begin well in advance.
A Medicaid eligibility worker can review all financial transactions a senior has made over that five-year period, starting with the date the person files for the Medicaid benefits. If the worker finds a violation of the rules, the applicant will be assessed a penalty, which translates into being ineligible for Medicaid benefits for a certain number of months.
Gifting Your Assets
It’s important to hire a legal professional to help you navigate the slippery slope of gifting. A Medicaid applicant can be assessed a penalty if they give away or transfer anything they own, or sell anything they own, for less than fair market value. Even paying a caregiver can cause a violation during the look-back period if the agreement is loosely made, i.e. no-written contract.
Your spouses aren’t off limits, either. An applicant’s spouse who transfers or gives away assets could also affect the applicant. The Medicaid eligibility agency wants to make sure that the gifted or transferred assets couldn’t have been used to help cover the cost of long-term care.
At Mahoney & Richmond, PLLC, our experienced, compassionate and trusted estate Attorney L. Ashley Brooks can help explain in more detail the look-back process and help you and your loved ones make the right decisions as you move forward in the next step of your life.