Medicaid planning is complex. It takes a team made up of your elder law attorney, your CPA, and your financial advisor to best advise you on how to pay for nursing home care and protect your family at the same time, as reported by CNBC recently, in “Here’s a surprise source you can tap for long-term care services”.
Medicaid covers a range of long-term services for eligible applicants. States generally require that individual applicants have no more than $2,000 in assets ($4,000 for couples). State income requirements vary by jurisdiction.
Medicaid planning is a strategy that can be designed by attorneys, accountants, and advisors to shift wealth to trusts or annuities to qualify.
Those who should be thinking about this are seniors who are not insurable for some reason. If they have some assets but needed care in a nursing home, their savings would quickly be drained.
To qualify for Medicaid and pass the means test, older individuals must transfer their wealth at least five years before they apply. There’s what is called a "five-year lookback." An applicant may be subject to penalties and be ineligible for Medicaid for a period. Meaning, without the Medicaid, they’d have to pay out of pocket.
However, a transfer of assets can be risky in Medicaid planning. That is because an outright gift of assets to a relative could mean that the recipient does not get a step-up in basis. They could wind up with hefty capital gains taxes, if they try to sell the asset immediately.
In addition, leaving money outright to a child can be reached in a divorce or by creditors. One Medicaid planning strategy may be an irrevocable trust. This is because those assets aren’t under the control of the senior and are protected from creditors.
Make certain to work with experienced professionals, especially an elder law attorney, because the plan will likely include tax planning, trusts and asset protection.
For more information on how we can help you with Medicaid planning, visit our website and contact us today to schedule your consultation!
Reference: CNBC (February 27, 2018) “Here’s a surprise source you can tap for long-term care services”