What is Medicaid Planning?
And How to Qualify for Long-Term Care Medicaid
Medicaid Planning is the process of legally and ethically protecting my client’s income and assets so that they do not have to go broke before they naturally qualify for one of the Medicaid Long-Term Care Programs described below. The specifics in this article describes Florida Medicaid programs but if you live in a different state, you can learn about the programs available for your situation.
My typical clients may or may not own their home (sometimes with a second property) and on top of that have between $20,000.00 and $750,000.00 in other liquid or countable assets. Their typical incomes are between $850.00 and $4,500.00 per month.
Medicaid planning utilizes State and Federal laws to convert these assets into an exempt or non-countable form without triggering the five-year gift penalty that allows my clients to qualify and get additional assistance right now.
A long-term care Medicaid applicant must pass an income test and an asset test.
Medicaid Income Test
Those who earn more than a certain amount in gross income, from nearly all sources combined, will not qualify (without additional planning). This is known as the “income cap” and will vary between states.
When a Medicaid applicant is married and their spouse does not need Medicaid (known as the community spouse), there is an income allowance (which also varies between states). The income allowance may allow all or a portion of the Medicaid applicant’s income to be diverted to the community spouse for programs that usually require income to go to a long-term care facility.
Medicaid Asset Test
Single individuals, in most states, cannot have more than $2,000.00 in what their state determines to be a “countable asset” or “countable resource.” Luckily, not all assets are countable. For example, in some states, such as Florida (where I practice), the primary residence, one car, personal items, burial contacts, life insurance with limited cash value, and income-producing property are all excluded. But other states differ (for better or worse) as to which assets they will allow a Medicaid applicant to exclude.
Married Couple. When only one spouse needs Medicaid long-term care benefits, the healthy spouse/community spouse, may have Community Spouse Resource Allowance (CSRA). The CSRA is a dollar value that the community spouse is allowed to retain to avoid forcing the couple into total poverty. The CSRA differs from state-to-state and can change from year-to-year. In Florida, as just one example, the 2023 CSRA is: $148,620.00.
It is important for me to emphasize that it is especially important for people who do not currently satisfy their state’s income and asset test, to speak with an Elder Law Attorney in their state! My firm works with many Floridians who do not naturally qualify for Florida Medicaid’s long-term care programs. We have legal and ethical ways to protect our client’s income and assets to qualify them for Medicaid.
What is the Five-Year Lookback Period?
The one thing you must not do if you are interested in qualifying for Medicaid – give assets away within five years (unless you are planning in advance, in which case its best to do this strategically and under the guidance of a qualified Elder law attorney).
It is very tempting to think: I’ll just give all my money away to my children (since that is who I want to inherit anyway) before I apply. Medicaid has the right to lookback five years from the date you submit your application. Everyone who applies signs a financial release that allows Medicaid to conduct their own financial investigation.
However, in some states, money can still be moved within five year of applying. In other states, you must plan ahead. Depending on your state, the right attorney can discuss how to, legally and ethically, protect your assets and get you qualified for Medicaid in a matter of a few months, not years.
In a future article, we’ll review some of the ways that we can help someone with excess amounts to still qualify for Medicaid without having to wait five years.
Links to Author’s Resources
Free Webinars: https://www.elderneedslaw.com/webinars
YouTube Channel: https://www.youtube.com/@elderneedslaw
Medicaid Planning Book: https://www.amazon.com/Medicaid-some-your-long-term-expenses/dp/1513634712