When it comes to senior long-term care, there are few things more important for most of our older loved ones than the benefits available from the Medicaid program. Many Indiana seniors rely on those benefits to pay for nursing home costs that continue to rise with each passing year. Like other income and asset-based programs, however, any senior’s ability to qualify for Medicaid benefits depends on his or her financial situation during the application process. To ensure eligibility, many people try to plan ahead on their own – and this often leaves them in a vulnerable state. Many make mistakes that lead to periods of ineligibility, and that can quickly wipe out whatever meager savings they might have. To avoid problems, it is important to dispel some of the most common myths about Indiana Medicaid eligibility and the program itself.
Myths About Asset Management Strategies
Many of the most common myths involve asset transfer strategies. Often times, people who suddenly realize that long-term care is an inevitability for them begin to frantically spend down their estate in an attempt to lower its value and qualify for program benefits. Others try to retitle assets in ways that they assume will escape Medicaid’s scrutiny. The problem is that all of these strategies can be doomed to failure when they are not properly executed in accordance with existing rules. A review of just a few of these myths can reveal just how much damage many of these strategies can do to your effort to obtain program eligibility.
Co-Ownership
One common myth involves the notion that co-owned assets won’t be counted by Medicaid for purposes of calculating eligibility. The idea goes something like this: if you own assets jointly with another person, Medicaid will ignore those assets’ value when it comes time to assessing your ability to pay for your own long-term care. This is one of those half-truths that often gets people into trouble when it’s time to move to a nursing home.
The reality is that there are some property types for which co-ownership of assets can work in this way. For example, if you co-own a piece of property or a vehicle, Medicaid cannot make you liquidate the assets to pay for your care – since that would be punitive for the other owner or owners. At the same time, though, there are many other types of assets that could be subject to the program’s scrutiny. That includes property like bank accounts that must be disclosed when you own any portion of the account. In general, accounts like that or co-owned investment accounts could be counted as assets if you cannot demonstrate that your co-owner(s) have put money into the accounts as well.
Annual Gifts
The allowable annual gifts are one of the biggest areas of confusion. Many people assume that their allowable gifts for spending down estates is equivalent to the $14,000 federal gift limit, per person each year. By assuming that, they confuse the estate tax gift exemption limit with the limits imposed by Medicaid, and could be subjecting themselves to needless penalties in the form of ineligibility for a set period of months. For purposes of Medicaid eligibility, the program in Indiana allows no more than a combined total of $1,200 in gifts each year.
A misunderstanding in this area can cause people to have gifted income counted as assets if the gifts were made during that five-year look-back period that Medicaid uses when calculating your eligibility. And speaking of that look-back period…
Five-Years of What?
The five-year look-back period is a never-ending source of confusion for residents in Indiana and across the nation. It is also a source of frustration for those who fail to adequately plan ahead years in advance of their Medicaid application. Essentially, the look-back period allows Medicaid to review all asset transfers you’ve made during the five-year period prior to your application, and count certain asset transfers as existing assets when determining your eligibility. The intent of the provision is obvious: to prevent people from hiding assets just to qualify for the program.
The biggest myth here is that some people think that they can successfully navigate the look-back period without falling prey to any of the many pitfalls that await the unwary applicant. The fact is that mistakes are so easy to make in this area of asset management that large numbers of people who try to transfer their assets on their own end up leaving themselves ineligible for needed benefits later. Your best bet is always to rely on an experienced professional to help you with decisions of this nature.
If Medicaid Won’t Pay, Medicare Will… or Will it?
Our final myth for the day involves Medicare and that program’s ability or willingness to pay for long-term care. Just assume that it won’t. While it is true that Medicare will pay for nursing home costs on a limited basis, but certain conditions apply. For example, you have to be admitted to the nursing home from a hospital, and you have to have been receiving inpatient care for a period that includes two midnights. Even then, care only receives coverage for a total of 100-days, unless it can be demonstrated that you need that care to continue to prevent your condition from declining. Believe it or not, that is actually a high bar in most instances.
Do You Need Help with Medicaid?
While it’s not exactly a myth, the question of whether or not you need assistance with Medicaid preparation is a valid one. Many people would like to assume that qualifying for any government program should be a fairly routine process. For many programs, that is certainly true. With Medicaid, however, the eligibility criteria and evaluation processes are such that professional assistance is usually your best bet. At Frank & Kraft Attorneys at Law, we understand how complex Medicaid planning and all estate planning concerns can be, and work with you to ensure that your future is secure so that you have the benefits you need when you need them most. To find out more about how sound Medicaid planning can help you secure nursing home financing, contact us online or call today at (317) 684-1100.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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