Five Costly Medicaid Planning Mistakes to Avoid When a Spouse Enters a Nursing Home

The average price tag of a nursing home stay in the United States is weighing in at a hefty, wallet busting $225 a day for a shared room. Private rooms and specialized care can cost even more! It is no wonder that Americans are racking their brains and wondering how they will be able to provide long term care solutions to their spouses while avoiding poverty in their own old age. At a time when Americans approaching retirement maintain an average retirement account balance of just $163,577, it does not take a creative mind to see how a spouse’s stay in a long term care facility could bankrupt you and leave few options for your own long term care.

Medicaid is increasingly forming the backbone of many Americans’ long term estate plans. Qualifying recipients can have significant portions of their long term care costs and ongoing benefits provided to them to ensure a dignified life not only for the one seeking nursing home care, but also for the family that is supporting them. When proper planning is done, you can ensure that your spouse receives Medicaid benefits and still leaves behind a sizeable inheritance, care plans for special needs adult children, and material spousal support. Are you or a loved one in a position where nursing home care may be a real possibility? If so, read on to learn about five costly Medicaid mistakes you need to avoid when either you or your spouse enters a nursing home care facility.

Mistake #1: Failing to Buy “Stealth” Assets

Thanks to recent changes in Medicaid eligibility, applying for Medicaid is more complex than ever before. Even though the eligibility rules have changed, many people still operate under the mistaken belief that in order to qualify for Medicaid benefits, you must spend or give away all of your assets and be totally destitute. This is wrong! If your spouse is about to enter a nursing home, you need to understand that they can receive Medicaid benefits without impoverishing you.

A skilled elder law attorney can identify stealth assets for you and your spouse to purchase. These assets do not count against Medicaid eligibility. Whether this means buying cars, a new primary residence, or performing house repairs, the purchase of stealth assets can help you ensure your family’s material comfort while preserving Medicaid eligibility and access to quality, affordable care. A secondary advantage to the purchase of stealth assets is that it can help you and your loved ones qualify for Medicaid earlier than you otherwise would. Rather than spending down your shared assets on long term care, use your funds to buy the necessities of life and qualify immediately! Not all qualified assets are appropriate for you. In order to better understand what assets make sense for you to consider purchasing while preserving or securing Medicaid eligibility, speak to one of our qualified attorneys and create an individualized Medicaid spend down plan.

Mistake #2: (Fraudulently) Transferring, Selling, or Giving Away Property

Current Medicaid regulations state that approximately every $9,000 to $13,000 (depending on the NY county of residence) given away by someone within five years (60 months) of applying for Medicaid benefits results in the disqualification of a single month’s worth of benefits. Selling things for far less than fair market value has the same effect. What makes this regulation particularly harsh is that the penalty blackout period does not start until after you or your loved one would qualify for Medicaid and submits an application for benefits. A person on the verge of requiring Medicaid coverage who quickly transfers a $120,000 house to their children to preserve their assets may have disqualified them from nearly 15 months of Medicaid benefits!

If your spouse is about to enter a nursing home and wishes to qualify for Medicaid, transferring or giving away assets to qualify is typically inadvisable. Experienced elder law attorneys can help you and your spouse craft solutions that will allow you to transfer qualifying property to family members, charities, and other entities that you both wish to support in the years to come. If a nursing home is still several years away, now is an ideal time to investigate your full range of estate planning options. Even if you or a loved one is currently in a nursing home or partaking in the CDPAP, speaking to an elder law attorney can help you identify options to reduce the financial burdens of long term care. Whether that solution is an irrevocable trust, cash value life insurance plan, or another instrument, there are available options.

Mistake #3: Spending Assets Beyond the Qualifying Amount.

Too often people who are trying to qualify for Medicaid benefits spend nearly all of their assets in an attempt to fall below the Medicaid eligibility threshold. While this strategy works, it will result in the surrender of an unnecessarily large portion of a couple’s assets and places the spouse not requiring treatment in a condition of near poverty. If your spouse is about to require nursing home care, do not make the costly mistake of spending excessive sums to qualify for benefits because there are better options available! One option your elder law attorney may recommend is purchasing a Medicaid exempt annuity for the spouse not requiring care. These insurance products will provide predictable income streams for you while ensuring that your spouse is afforded Medicaid funded care.

Mistake #4: Failing to Use Gift Exemptions to Qualify

Medicaid regulations generally punish Medicaid applicants for transferring or giving away property and money during the five-year long “look back” period (in California, the look back is only 30 months but the penalties are still the same). There are exceptions that your elder law attorney can identify that may apply to your unique situation.

One such exemption allows a Medicaid dependent beneficiary to give money and property to disabled children or to adult children who recently provided live-in care to the Medicaid dependent. These powerful exemptions can save tens of thousands of dollars without disrupting your benefits. Get advice that is custom suited to your particular situation and see whether you can continue to provide for your family while retaining eligibility.

Mistake #5: Failing to Complete Effective Estate Planning.

Because of the vulnerable nature of people requiring nursing home care, failing to have durable powers of attorney forms that specifically entitle you to make gifts of your spouse’s assets to preserve eligibility can result in major missed opportunities and avoidable expenses.

A competent estate planning advisor can also provide meaningful guidance on how to pay for long term care facilities, whether long term care insurance is required, whether a trust is right for you, and whether there are insurance products that can provide substantial support to your family.

These are just five of the costly Medicaid mistakes you need to avoid when either you or your spouse enters a nursing home care facility. At the Law Offices of Irina Yadgarova we will be able to identify dozens of other potential pitfalls to avoid and will help you continue to provide your family with the lifestyle they’ve grown accustomed to. Call us today at 347-699- 5529 or click here to arrange for an individual consultation.