The Federal government enacted the “Deficit Reduction Act” which changed the rules for qualifying for Medicaid. Medicaid is the needs tested program which pays for health care that Medicare and private insurers will not pay for, specifically, custodial care. Such care can cost $50,000 or more per year. However, to qualify for Medicaid, you cannot have over $2,000 in assets.
The law makes it much more difficult to qualify for Medicaid benefits. Under both the old and the new laws, there is a penalty period if you make a gift of assets. While under the old law the penalty began on the date of the gift, under the new law it does not commence until you apply for benefits, meaning you could be disqualified from benefits for much longer.
However, transfers more than five years prior to application for Medicaid are not considered. This makes it more important than ever to plan ahead. By planning, you can even put assets aside for yourself. You could gift assets into an “Irrevocable Income Only Trust.” With such a trust, you can retain the income, though you can have no access to the principal. Your children or other loved ones can be your beneficiaries as to principal.
If you do not have five years before you are likely to need Medicaid benefits, there may still be planning options. While the new Medicaid act was passed by the Federal government, Medicaid programs are administered by state governments which have to pass coordinating legislation. It may be possible to act in the next several months and still come under the more lenient old rules.
Regardless, whether under the old rules or the new rules, time is of the essence. If you think you may need long-term care in the next ten years or less, it is essential to explore the options now, before some of your choices are eliminated by the new Federal Medicaid changes. A qualified estate planning and elder law attorney can help you navigate the changing tides of Medicaid planning.
Mr. Ronald “Chip” Morrison, Jr. is a member of the American Academy of Estate Planning Attorneys and has been engaged in the practice of estate and elder law for the last 16 years. Whatever the outcome is, we are here to answer any questions you have and guide you through your long-term care options, including how to find and pay for any care that’s needed in the least restrictive environment possible. For more information or to attend an upcoming seminar, please call our office, located in Metairie, Louisiana, at (504) 831-2348 or contact us through our website.