As someone who has been practicing elder law for decades, I find it amazing that so many people are willing to give their friends and acquaintances advice about Medicaid planning and that so much of the advice they give is absolutely wrong. And then there is the Internet…
When mom or dad are starting to fail, it is not time for amateur hour. Not taking action or taking actions that are unwise could be very costly and even disastrous. Make sure that you get very good advice before acting. Doing research on the Internet is fine but bear in mind that, although Medicaid is a federal program, it is administered by each individual state. Each state has its own laws and rules. Furthermore, the Medicaid rules vary from county to county. What is done in New York City may not be the same as what is done in Nassau or Suffolk County. You need good advice.
Some of the law discussed in the article only pertains to New York. This article is not legal advice but is intended for informational purposes only. Everyone’s situation is different and it is recommended that you seek the services of a qualified attorney to give you proper legal advice tailored to your circumstances.
Here are some common things that I have heard that are not true:
Medicare Will Pay for Long Term Care
If you need home care, Medicare will provide a very limited number of home care hours, for a very limited period of time. If you need nursing home care, Medicare will provide only a limited number of days. Furthermore, Medicare only provides coverage for services related to medical care. If you only need help with dressing, bathing, toileting or similar activities of daily living, Medicare will not provide coverage: you must pay out of pocket or apply for Medicaid.
If I Am on Medicaid, I Will Have to Go to a “Medicaid Nursing Home”
There is no such thing (at least in down-state New York). You may have a better selection of nursing homes if you are willing to privately pay for a few months or so, but all nursing homes will accept Medicaid.
You Cannot Transfer (Gift) Assets 5 Years Prior to Needing Long-Term Care
Not true. First, there is no look-back period for home care (not even a “three-month” look-back period – another Medicaid myth). Second, even if the person is applying for nursing home care, even though there is a five-year look-back period, ninety-nine percent of the time we can still do planning that will preserve assets. Third, there may be persons to whom assets can be transferred that will not be subject to the five-year look-back period, such as a spouse or blind or disabled child.
If My Spouse Is Incompetent, I Have the Authority to Transfer His or Her Assets
If an individual does not have legal capacity to transfer her assets to someone else, then the assets cannot be transferred unless the person transferring the assets on behalf of the individual has the appropriate legal authority. The best way for someone to obtain legal authority is through a power of attorney. (In New York, you will also need a statutory gifts rider appended to the power of attorney.) This is the least expensive way of giving a person the authority to transfer assets on behalf of another. However, the person signing the power of attorney must have legal capacity. In very general terms, legal capacity means that the person understands what she is signing. It is not sufficient that she is capable of signing her name. If the person does not have legal capacity, then one must go to court to obtain a guardianship over the property of the person. As with every court proceeding, there is expense and delay.
When I Learn that My Parent Is Starting to Fail, I Should Get the Assets Out of His or Her Name
Although there is planning that can still be done, even if the individual is on the verge of needing nursing home care, transferring assets out of the person’s name without a well-thought out plan can lead to unhappy results. Transferring assets within the five-year look back period may cause a hefty penalty. Monies may be transferred to someone causing a penalty when there is an opportunity to transfer monies to another individual without penalty. The money may need to be returned to the individual applying for Medicaid. There may be more tax efficient ways to transfer the asset or in certain situations, it may not be necessary to transfer the asset at all. A gift tax return may have to be filed. Again, the best thing to do is to obtain appropriate legal advice.
I Can Just Give Money to My Spouse
In New York, monies can be transferred to a spouse and if the spouse is above the impoverishment amounts for income and/or assets, a spousal refusal can be signed. This will qualify the individual for Medicaid. Spousal refusal is not available in most states. Even in New York, there is a possibility of Medicaid requiring a contribution from the refusing spouse or from the refusing spouse’s estate. It is best to get the proper advice.
The Person Applying for Medicaid Is Allowed to Give Away $15,000
Not true. Although one may give away $15,000 without federal tax implications, for Medicaid purposes, giving away $15,000 could cause a problem in applying for Medicaid.
I Know About Medicaid Because My Friend Went Through It
Everyone’s situation is unique. What may have applied in your friend’s situation may not apply in yours. The law surrounding Medicaid is very complex and sometimes people’s friends do not understand what was done or why it was done. Furthermore, the law changes all the time and may no longer be applied in the same way that it was in your friend’s situation.
My Banker, Financial Planner or Accountant Can Advise Me about Medicaid
No, they can’t. Get proper advice from an attorney who concentrates in the area of elder law.