Planning For Medicaid Coverage

We all know that 1 out of 3 of us will spend some time in a nursing home at some time in our life, and that the average stay is just over 2 1/2 years. So when is a good time to start planning?

Most people play the odds, figuring that they may never need to go into a nursing home, that they will keep their independence and then die in their sleep. Yes, I agree that is a decent way to depart this earth, but what if your health starts to take a turn for the worse, but your life expectancy is still normal? How far do you let things go before starting the planning process? Let me break this down into stages.

Power of Attorney. Everyone should make sure they have signed a comprehensive durable power of attorney ("POA"). "Durable" in this context means that it continues to be effective even if you become incapacitated. Of course, that's exactly when you need it the most! Be sure it includes specific authority to make gifts for Medicaid planning purposes; without that, your state law may not permit such gifting. Most people name their spouse, if competent, otherwise one or more children, as their "agent," i.e., the person to whom you are giving the power to act on your behalf under the POA.

Signing a good POA is the single most important long-term planning item you can do. After all, the day after you sign the POA, you could have a stroke, need nursing home care, and now your agent can do Medicaid planning for you.

Gifting Program. While signing a POA is certainly good advice, that doesn't mean that you can now sit back and do nothing. Here's why: many Medicaid planning techniques require transferring assets, either into a trust or outright to children. Under the current rules, any such gifts made within 5 years of the date you apply for Medicaid can come back to haunt you, i.e., cause a period of ineligibility (a so-called "penalty period"). So the sooner you make these transfers, the sooner the 5-year period will be over, thereby protecting all of the assets you transferred while still permitting you to qualify for Medicaid.

Consider a Long-Term Care Policy. "OK," you say, "so I have to think 5 years out....that's a long time! How can I predict my health that far out?" Here's one tip: consider purchasing a long-term care policy, one that covers you for 5 years should you need it. That way, if you suddenly needed long-term care in a nursing home, your agent under your POA could make the transfers, and the policy would cover you during the penalty period!

Legal Consultation. Finally, when it looks like nursing home care is in the cards, either because you or your spouse have had a health reversal (stroke, early dementia, beginning Alzheimer's), sit down with an experienced elder law attorney and go through all your options. Bring in your powers of attorney, your wills, living wills, deeds, etc., and let the attorney review everything. The attorney will then make his or her "diagnosis," after considering your health, your age, your assets, family situation, and current state of the law. Such diagnosis may be to set up an irrevocable trust and transfer certain assets into it, purchase a Medicaid-friendly annuity, re-title the home, purchase long-term care insurance, etc. Remember, the average cost of a nursing home in the U.S. is now over $75,000 per year; if that attorney saves you even one month's nursing home bill, his or her fees will start to look cheap!

K. Gabriel Heiser is an attorney with over 25 years experience in elder law and estate planning. Heiser is the author of “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets,” an annually updated practical guide for the layperson. For more information about this book, visit Medicaid Secrets.

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