We are often surprised at the amount of misinformation that exists is the area of Medicaid planning. Nearly everyday someone will tell us that their friend, co-worker, church member, CPA or even attorney recommended for example, that they should add their children as co-owners of their home or other assets to “protect against the State taking everything”. Unfortunately, this type of erroneous information that is passed on as helpful Medicaid planning advice often cause clients to lose thousands of dollars. In an effort to help educate and prevent others from making these all too common mistakes, we have complied our list of the top 10 Medicaid planning mistakes.
1. Believing it’s too late to plan.
Even after a loved one has been admitted into a nursing home, steps can (and should) be taken to protects assets.
2. Giving away assets.
Adding a child’s name to the deed for a home or transferring assets is a far too common mistake. Under the gifting rules that went into effect in 2007, there is now a 5 year look back period far any gifts or asset transfers. Before giving away money or real estate, consult with an elder law attorney to determine if this is a good idea.
3. Believing the gift tax exemption applies.
Gifts up to $13,000 per year are exempt under the IRS rules from gift taxes. However, the gift tax rules do not apply to the Medicaid rules. ALL gifts, even birthday or Christmas gifts, or tithes or other donations to a church or charity are subject to a 5 year look back period under the Medicaid rules.
4. Failing to utilize the spousal protections.
Congress has provided that a spouse still living is the community should not become impoverished. Too often however, people fail to realize that assets can be legally protected for the community spouse.
5. Failing to plan ahead.
Too many people fail to plan ahead even after they have been diagnosed with a debilitating disease like Alzheimer’s, Parkinson’s or dementia. Due to recent Medicaid rule changes, planning ahead is more important than ever.
6. Failing to prepare for estate recovery.
In 2007, Michigan enacted estate recovery which allows the State to seek reimbursement after the person dies. It is critical when planning for Medicaid that families now also take steps to protect against estate recovery.
7. Filing a Medicaid application too early or too late.
With nursing home costs exceeding $6500.00 per month, the filing of a Medicaid application too early or too late can cost thousands of dollars.
8. Not having a power of attorney.
Because the nursing home resident is often incompetent, it is critical to have a power of attorney that allows someone to act on a person’s behalf.
9. Assuming DHS will help answer my questions.
Expecting DHS to help you in Medicaid planning is like asking the IRS to assist you with paying less income taxes.
10. Not seeking expert help.
Medicaid is very complicated and with nursing homes costing $6500.00 per month, mistakes can be very expensive. It is foolish not to seek the advice of an elder law attorney.