Qualifying for long term care under the Mass Health Medicaid program requires a certain commitment to detail, and also some understanding of pitfalls in the process. At our office, we frequently counsel clients hoping to minimize the extent to which Medicaid will reduce the family’s assets. What follows is the second part of an article on some mistakes and myths to avoid when planning for Medicaid.
Using a Living Trust to Protect Assets from Medicaid
One myth is that a living trust will protect one’s assets from Medicaid. But statements like this are typically heard from a salesperson. A living trust is “revocable,” meaning that the grantor may revoke it at any time. This means that for purposes of Medicaid, the grantor applicant still has full access to those funds, and therefore still has control. An irrevocable trust, by contrast, will not be a countable asset. Still, any transfer into an irrevocable trust within the 5 year look back period will be considered a disqualifying transfer, which again demonstrates why an experienced Massachusetts Medicaid attorney should be consulted by anyone considering long-term care planning.
Mistakenly Believing an Old Annuity will Protect Assets
In the past, prior to the Deficit Reduction Act of 2006 [DRA], couples were encouraged to purchase annuities by their insurance agent or other financial planner in advance of any potential Medicaid application. The goal was to protect the funds from Medicaid liability. But the Act made some important changes to what annuities are uncountable in the application process, resulting in many annuities no longer having protective value. Annuities offered after the act as DRA compliant will still have protective value, but note that these annuities must be “immediate” as opposed to “deferred.”
Gifting Assets Too Early or Too Late
While the reasons why may not be clear at first, having a potential applicant gift assets to members of his or her family too early can lead to undesirable consequences from many unanticipated events. First of all, the applicant’s financial security should be a primary concern before any assets are given away. It would be unfortunate, for example, if a parent gave away his or her home when the assets retained to live on, e.g. mutual funds, lost half of their value 4 years down the road. Moreover, it would be equally painful if the home was given to a son who subsequently went through a divorce, or incurred substantial liabilities in a serious automobile accident. Transferring too late, by contrast, may substantially impact your eligibility for long term care under Mass Health. Being deliberate and thoughtful over the available options is therefore paramount.
Failing to Use the Spousal Protections of a Medicaid Applicant
Without consulting an attorney, a married applicant and her family might not be aware of certain protections available to the spouse. A husband and wife are entitled to protecting certain assets belonging to the both of them up to certain limits. Assets that may be saved include income coming to the community spouse, the primary residence, and other assets up to around $110,000. Do not fill out the Mass Health application before forming this part of your Medicaid planning strategy!
Not Consulting a Massachusetts Medicaid Attorney to Save Money
Attempting to gain eligibility for Medicaid is a complex process that most people, (and even most attorneys), will only go through once in their life. This application process, however, is also extremely risky in terms of losses to both family assets and the delivery of vital care. Because of these factors it is crucial that the applicant contact and enlist the expertise of an experienced Massachusetts Medicaid attorney. Moreover, scheduling a free consultation with our office ensures that you’ll be able to project all the necessary costs up front instead of playing what is often a dangerous guessing game.
Go back to Part 1 of 10 Tips From a Massachusetts Medicaid Attorney by clicking here
