A Little Medicaid Knowledge Plus Good Intentions Does Not Equal Good Medicaid Planning Advice
A little knowledge can be a dangerous thing, and this is especially true when it comes to Medicaid Knowledge. As a Certified Medicaid Planner™, I have the experience and training to look at the whole picture and not just bits and pieces. Unfortunately, there are other professionals out there who don’t have that same knowledge and experience, but that hasn’t stopped them from giving disastrous advice.
Just a few weeks ago, a longtime client of ours with dementia went into a nursing home for rehabilitation. Once it was determined that she was not going to get better enough to return home, Medicare was no longer going to pay for her care. Her husband saw what the monthly costs were going to be, and he went into a panic. This panic was only amplified by professionals around the husband.
“You have too much money to qualify for Medicaid!” said a social worker at the nursing home. “Make upgrades to the house! The contractor says it will be about $100,000.”
“Yes, you need to spend more money!” said a second social worker at the nursing home. “Buy a bunch of clothes and supplies. Then apply for Medicaid!”
Thankfully their actual financial advisor got in touch with us because… we had established a Medicaid game plan nearly seven years ago. The real estate was already protected inside an Irrevocable Property Trust more than seven years ago. More than half of their assets had been moved into an Irrevocable Family Trust more than seven years ago. Nearly $300,000 had been moved into the Irrevocable Family Trust only two years and one month ago. There was still about $200,000 in liquid assets that the other professionals were trying to get my client to spend and then immediately apply for Medicaid.
But none of those other professionals had any knowledge of how the $300,000 transferred two years ago was going to affect Medicaid.
Here’s what would have happened:
- The application for Medicaid would have been rejected because of the $300,000 “gift” to the trust 25 months ago;
- A penalty period of 3 years and 10 months would have been assessed before he could apply for Medicaid for his wife (even though there was less than 3 years for Medicaid’s five year clock to run);and
- The client would have not had the liquid assets to private pay for his wife’s care during the nearly four more years and his daughter would have to dip into the trust to make up the shortfall.
The better course of action was what we had advised all along:
1) Use her income and the assets in the couple’s name to private pay for the next 35 months;
2) Don’t go crazy spending money on a new car or home upgrades unless they were actually needed for the husband;
3) The daughter would have to private pay a lot less (using the family trust assets); and
4) The family would have come out tens or hundreds of thousands of dollars ahead.
As I said, I spoke with the daughter/Trustee and the financial advisor and stopped our client from making a serious mistake by listening to these other professionals who only knew a small part of the information. The horrible thing is that the professionals, armed with only a little bit of knowledge about Medicaid and Medicaid Planning, gave extremely bad advice while thinking they were genuinely helping our client.