Medical expenses can quickly become overwhelming. If you end up needing long-term care, which is a very real possibility, then your assets can be quickly gobbled up. The good news is that there are strategies that you can implement to protect your assets and your ability to secure the effective care you need.
But Medicaid planning is complicated. There are a lot of mistakes that can be made along the way. If you’re not careful, then they could leave you with unintended consequences and in a dire financial predicament.
Medicaid planning mistakes you’ll want to avoid
One of the best ways to protect your ability to secure Medicaid is to be aware of the mistakes that people make when they try to plan for it. Here are some of the most common and detrimental that you’ll want to avoid:
- Procrastinating: This is oftentimes the biggest barrier to qualifying for Medicaid. Given that there’s a five-year lookback period pertaining to the transfer of assets, if you wait too long to start planning then you’ll be delayed in receiving the benefits you need. This can cause you to incur significant costs that are otherwise avoidable.
- Not dealing with your family home: You and your spouse are probably on your home’s mortgage and title. But if this happens and you pass away while receiving Medicaid benefits, then a lien might be placed on the home. This means that once the home is sold, Medicaid will seek to recoup that money for services that it paid for while you were receiving care under the program. Re-titling the property in your spouse’s name can help avoid this.
- Hiding assets: You might think that it’s easier to qualify for Medicaid if you just fudge some numbers or conceal assets, but this is a huge mistake that could actually lead to criminal charges, as the government will view this as fraudulent behavior. You have to be open and honest when you apply for Medicaid benefits.
- Using the wrong estate planning tools: There are estate planning tools that are effective at reducing your assets to the point that you qualify for Medicaid. An irrevocable trust, for example, is exempt so long as the assets were transferred into the trust more than five years ago. If you use an estate planning tool that allows you to retain control over your assets, though, then it will almost assuredly count against you for Medicaid eligibility purposes.
- Misunderstanding lifetime giving: You can avoid estate taxes by gifting money to loved ones during your lifetime, but these gifts are not excluded from Medicaid eligibility determinations. Therefore, you’re not going to be able to render yourself eligible for Medicaid simply by gifting away your assets unless you do so outside the five-year lookback period.
- Failing to plan for estate recovery: If you receive Medicaid benefits and subsequently pass away, then the government is going to come after your estate to try to recoup the funds that they expended for your care. This is known as estate recovery. There are ways to minimize what the government can take from your estate, but it requires adept estate planning.
Find the Medicaid planning path that’s best for you
Securing Medicaid’s resources can give you significant financial support. But obtaining the benefits provided through the system is going to take some work. That’s why now is the time to start planning. Don’t get trapped into thinking it’s too late.