Recently, a number of clients have expressed interest regarding the possibility of planning to protect their retirement assets in the event they require expensive long-term medical care. Frequently these discussions include the topic of Medicaid and whether the client should give their assets in the short term to avoid Medicaid's five-year penalty period. These clients want to make sure they receive sufficient care without consuming so much of their nest egg that their spouse or other loved ones have little to nothing after they pass away. Before engaging a client in the discussion of the legal techniques used to preserve assets for a spouse or loved ones while qualifying for Medicaid, it is important to me that the client understands the potential downsides to Medicaid.
One of the first things I ask client who inquires about qualifying for Medicaid is whether they are comfortable with the idea of leaving their home and moving into a long-term care facility. Many clients are surprised to discover that, with some minor exceptions, Medicaid only covers expenses related to long-term care in a Medicaid approved facility. This means that the client must move from their home into such a facility. This causes some clients to rethink their desire to pass on assets at their death and instead focus on using their resources for their own comfort and well-being. Even when clients are not concerned about leaving their home, many will rethink divestment plans when faced with the limitations of facilities that accept Medicaid.
While Medicaid is sometimes referred to as the best insurance money cannot buy, there are limitations to what that insurance provides. While many quality facilities that are primarily private pay also maintain a limited number of Medicaid qualified beds, the majority of Medicaid beneficiaries live in care facilities that lack the resources to provide the level of care clients may expect. For clients with significant resources, the revelation that maintaining their assets provides additional options is another factor that reduces the desire to divest assets in order to qualify for Medicaid. When faced with moving from their home and the limitations of Medicaid care, most clients change their mind about giving away their assets and instead prefer to take steps that make further Medicaid planning possible in the event that a change in circumstances makes such planning necessary.
This brings us back the client’s original concern that healthcare costs will consume their assets leaving nothing for surviving spouses or other loved ones. Thankfully, even when Medicaid is not immediately necessary it is possible to take steps to prepare the clients to take advantage of Medicaid if the need arises. This planning includes drafting broader Durable Powers of Attorney to provide the Attorney in Fact with the specific authority to make transfers and gifts to assist the client in qualifying for Medicaid and discussing other steps the client can take to decrease their countable assets while improving their quality of life.
Medicaid is a complex area of law and any actions taken to assist in qualifying for Medicaid should be taken only after a consultation with an attorney familiar with the law and the clients’ particular circumstances.