medicaid advisor: filing for medicaid

Filing for Medicaid

BY COLIN SANDLER

In theory, people should be able to apply for Medicaid without hiring a professional. However, doing so requires a good understanding of all the nuances of Medicaid eligibility. Trying to go it alone can be financially devastating.

When you are admitted to a nursing home for a long-term placement, you should immediately explore your options for Medicaid, even if you do not think you can qualify. People often rely on the nursing home’s finance department to help them through the application process. They can do that but it is not the home’s role to help you with any asset protection. And if they know about any transfers of assets, they may simply say you do not qualify. But what if this isn't necessarily the case?

CASE STUDY 1: In the five years prior to nursing home placement, Martin had given money to his grandchildren to pay for college. But he gave the money to the parents of his grandchildren, and did not pay the college directly. When Medicaid reviews his financial statements, they are going to see gifts given to his children. Ultimately, Medicaid does not care about the purpose of the gifts, and they will penalize for transfers of assets. A penalty for asset transfers means Medicaid will deny coverage for a period of time consistent with the funds gifted.

This issue often happens when people give gifts according to IRS guidelines, which allow what people think is a permissible tax free gift per year (i.e., $15,000). However, Medicaid does not follow the IRS guidelines and will in fact count this as a transfer of assets. CASE STUDY 2: Barbara enters a nursing home and still has a significant amount of money in her name. Her family believes they have to continue to pay the home until all of Barbara’s funds are spent down. They may not realize that she can pre-pay an irrevocable burial fund for herself and for her children without incurring a penalty period. Also, they may not know about a gift note strategy which allows you to protect between 40 to upwards of 50 percent of the remaining funds. This strategy has to be implemented immediately upon admission. It cannot be done once the funds have been spent.

CASE STUDY 3: Cheryl didn’t have any assets to speak of when she was admitted to the nursing home but she does have a life insurance policy with a $150,000 death benefit and a cash value of $30,000. She cannot own a life insurance policy with that much cash value and qualify for Medicaid as the cash value counts as an asset. Once admitted to the nursing home, it's too late to transfer the ownership of the policy to somebody

Colin offers FREE weekly seminars on Community Medicaid and Nursing Home Medicaid via Zoom. Please check MedicaidSolutions.com for information and registration. else. Usually, people are advised to cash out the policy. However, cashing out means Cheryl would lose the value of the life insurance that would have gone tax-free to her beneficiaries. An alternative to this would be to take a loan against the policy, prepay any funeral arrangements, and any money remaining would go towards the $15,000 Cheryl is allowed to keep or would go to the nursing home towards her cost of care. Once the cash value is lowered below the Medicaid threshold, Cheryl can keep the policy and her beneficiaries would still benefit from the payout upon her passing. Although the payout may be reduced by the loan, they haven't lost the whole value of the policy.

CASE STUDY 4: John is admitted to a nursing home. He has property as well as assets in the bank. Upon discussion with his family, we learned one of the adult children is collecting Social Security disability. This adult child is not accessing any government entitlements (i.e.; Medicaid, food stamps, etc.). A transfer of assets to an adult disabled child does not have any penalty period and is an acceptable transfer. Asking one simple question could change the disposition of all your assets from going to the nursing home to going to your child.

As illustrated in the cases above, a Medicaid specialist may be able to provide options for protecting assets should a nursing home placement occur. If any assets can be protected, you should know about it as soon as possible in order to implement allowable strategies.

n n n Colin Sandler, LCSW, CCM, is the owner of Medicaid Solutions and has been providing advice on aging to seniors and their families for over 20 years. Call 914-9242566 or email Colin@Medicaidsolutions.com; 2127 Crompond Rd, Cortlandt Manor, NY.