Medicaid - Truths, Myths, and Pitfalls

Article submitted by Verble Estate Preservation & Advisors LLC.
For more information, they can be reached at 615-896-4803 or 800-891-6474.

Have you ever heard this statement before? "My aunt was on Medicaid while in a nursing home and they took her house when she died." Many of you have known family members or friends in the same boat when it comes to receiving Medicaid benefits that cover today's long-term care facility cost. When we think of the term Medicaid, often the first thought that comes to mind is that those who are covered are from impoverished households. Surprisingly, this dynamic is changing. More than 60% of those being placed in long-term care are seeking Medicaid eligibility. The main factor driving this change is the ever-rising cost of long-term care. The average cost of a long-term care facility is $135 per day or $4,050 per month. Coupled with the facts that we are living much longer than the previous generation, and our stay in long-term care facilities has lengthened to an average of 2.3 years, our total average cost of care has risen to a staggering $113,400. This cost is expected to increase by 200% by 2010. The new question is Do you have assets that can cover this amount without liquidating all that you have worked hard for during your lifetime? Without a thorough understanding of how the system works, you and your loved ones could lose the financial legacy you planned for them.

Some of the Truths & Myths regarding Medicaid qualifications are:

You do not have to give up your own income when your spouse goes into a long- term care facility. In fact, all income in your name remains in your possession.
Business income, such as income from rental properties or any other business-related income, is not considered a resource. Unfortunately, your investment income (i.e. stock dividends, interest income...etc) is counted as a resource no matter which spouse's name it is in. The actual amount you are allowed to keep in investments or liquid assets is 50% of the accumulated value up to $92,760. The remainder will be used in the spend-down calculation for the spouse that is applying for Medicaid.

Some of the common pitfalls that many families fall victim to are:

Acting on advice from well-meaning, but uninformed sources. After all, what happened to someone else's distant relative may not apply in your unique situation.
Just because the IRS says you can gift out $11,000 to anyone each year, does not mean Medicaid will honor your gift. In fact, any gift over the monthly cost of care is subject to a 36-month look back period and subject to reversion by Medicaid.
Changing the name on the deed to your real estate within three years of applying for Medicaid coverage, will not safeguard your assets.

By planning and utilizing the exemptions provided by Medicaid, you will be able to make sure that the family home is not lost. You can protect the income from your IRAs in most cases if properly planned. Often when one spouse remains in the family home, additional measures can be utilized to see that their standard of living can be maintained during these years. Planning is the most important action you can take to preserve your legacy and protect the standard of living for those you love. Without a knowledgeable professional to design the best solution for your specific needs, you or your loved ones could end up losing assets needlessly. Start today. Seek a professional that specializes in asset preservation and Medicaid solutions.