People think that Medicaid will solve all financial problems if they or a spouse will need expensive medical care late in life. It's not that simple.
Concerns about outliving assets or having all their wealth spent on nursing home care has led many people in different economic brackets to take steps to qualify for Medicaid as part of their estate planning, according to an article in Kiplinger, "What You Need to Know About Applying for Medicaid." But Medicaid was not designed to be the first source for health care costs.
Remember that your income and assets have to be at a very low level to qualify for Medicaid. This program isn't a right or an entitlement—even if your tax dollars paid for it. Medicaid provides assistance for ongoing living needs and services provided by home care or, in advanced cases, at a nursing facility.
Medicaid compliance requires an individual to relinquish either income and assets or control over the income and assets. But many Americans are in their sixties or seventies, in good health, with plenty of assets. These folks aren't ready to part with their income and assets—or control over them—as many still have healthy, active years ahead of them.
In many instances, becoming Medicaid compliant is based on a recent crisis that adult children have experienced caring for their own parent's age-related issues—such as dementia, Parkinson's disease, or Alzheimer's. Many of these Baby Boomers don't want their own children to suffer the emotional turmoil and financial commitments they've had to handle. Instead of rushing into any decisions unnecessarily, here are some scenarios to think about with Medicaid planning:
- Younger than Age 70 and Healthy. Don't commit yourself to transferring assets for at least another decade. You can place your real estate and certain businesses in Medicaid-compliant trusts and use non-retirement assets for discretionary expenses.
- Younger than Age 70 and Not Healthy. There's some time to plan, but due to five-year "look back" constraints for asset transfers, a comprehensive understanding of Medicaid is critical.
- High Income, But Low Assets. Large amounts of either assets or income can make a person ineligible for Medicaid. But while assets can be transferred to another family member, income is harder to transfer, and the amount of retirement income we receive is not easy to control. Younger pensioners with large monthly incomes should talk to a qualified Medicaid attorney about ways to convert large incomes to assets that can be transferred to other individuals.
- Disabled Minor Children. Medicaid planning for a disabled minor child should start prior to the child attaining the age of 18. Courts grant guardianships more easily over people who have never had mental competency than those who have had it and lost it, and will look at the future guardian's ability to apply for Medicaid. Benefits may be easier to obtain in these situations.
- No Spouse and No Children. You may think about not pursuing Medicaid planning unless you feel you need to preserve your extended family's wealth. Medicaid may pay additional health care costs that Medicare doesn't, but the personal care Medicaid provides may be less than what out-of-pocket care providers can offer. These people should use their assets for their own benefit wisely and save Medicaid for when those assets are depleted.
Applying for Medicaid puts your financial life in the hands of the complex laws that govern it. Talk with an elder law attorney about the many restrictions and requirements for Medicaid before embarking on the application process. Have a full understanding of the program and the impact it will have on you and your family now and in the future.
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