Thursday, January 18, 2018
Business

Medicaid planning can increase chances of qualifying for aid

As baby boomers age and prepare for retirement, many are undertaking a different type of financial planning, known as "Medicaid planning."

Medicaid is a federal-state program that helps pay for health care for the poor. Medicaid planning involves putting you in the best possible position to qualify for Medicaid, while at the same time preserving your assets for your loved ones.

Consider hiring a professional, such as an elder law attorney, to help you.

"Be very, very careful about whom you deal with as a professional," said John McNair, an elder law attorney. There are many financial advisers "who are advertising themselves as Medicaid planning experts and they're basically doing all of this a lot of times for the purpose of selling a product," he said.

"You have to not have assets by the time you apply," McNair said. "On paper, you are poor. How we get you there is what we do in the planning process."

Here is what you need to know about Medicaid planning:

SPOUSAL SAFEGUARD: Because the expense of nursing home care can deplete a couple's savings, Congress built in a safeguard to ensure that an elderly couple doesn't completely impoverish themselves if one has to move to a home.

Under the Medicaid "spousal impoverishment provisions," a certain amount of a couple's combined resources is protected for the spouse still living at home.

"If one spouse has to go into a nursing home, and all of that spouse's income went to pay nursing home bills, the spouse at home would have substantially less income to live on," said Brian Fant, a Dallas elder law attorney.

MILLER TRUST: Also known as a qualified income trust, a Miller trust can help people applying for Medicaid nursing home benefits whose income exceeds the monthly cap.

With a Miller trust, you can legally reduce the amount of your income that's counted for eligibility purposes by directing your monthly pension or Social Security payments into the trust.

COMMON MISTAKES: Perhaps foremost among those is selling your home.

"Selling a home to qualify for Medicaid is a bad idea as the proceeds from the sale will likely turn an excluded resource into a countable resource," Fant said.

Another common mistake people make is thinking that just giving away their money or assets will enable them to qualify for Medicaid. It's not that simple.

"Medicaid has what is commonly referred to as a 'look-back' period of five years for almost all transfers," Fant said. "This means that, with very few exceptions, transfers within 60 months of filing an application are counted and will disqualify the applicant from Medicaid eligibility for a length of time based on the amount of the transfers."

Pamela Yip is a personal finance columnist for the Dallas Morning News.

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