The Need For Medicaid Planning

By Kim Boyer

It is never too early to being thinking about long-term care and planning ahead.  People are living longer and could suffer from debilitating conditions that require long-term care. In general, there are three ways to pay for long-term care: using your own income and assets, long-term care insurance, or Medicaid.  Veterans may qualify for benefits to help with long-term care.

If you need heart bypass surgery, you will be covered by Medicare or other health insurance. If you develop Alzheimer’s disease and need long-term care, it is not covered. Long-term care is expensive and can drain a family of their assets. If there is time to plan ahead, more options are available. Some strategies to pay for long-term care can include:

  • Using savings and investments and investing wisely.
  • Long-term care insurance.
  • Viatical and life settlements.
  • Accelerated death benefit riders on life insurance.
  • Long term care riders.
  • Annuities.
  • Reverse mortgages.
  • Irrevocable trusts.

People often wait until disaster strikes before consulting an elder law attorney.  By then, their options are more limited.  In many cases, the only option is to seek eligibility for Medicaid. Following is an example of a Medicaid case study.

Medicaid Case Study.  Ben’s wife May has advanced Alzheimer’s and must go into a nursing home.  He’s afraid that their entire life savings will be gone if he has to pay the nursing home $9,000.00 per month, and that he won’t be able to pay the monthly bills.

The couple has $137,000.00 in savings, a house and a car.  His social security check and pension total $3,984.00 per month, and her social security check and pension total is $2,642.00 per month. Their house and car are exempt. The savings can be kept by Ben as his community spouse resource allowance.  Also, he would only be able to keep his income, and none of his wife’s income.  The issue is that his wife’s income is over the current (year 2022) income cap in Nevada, $2,523.00.  Mary can become eligible for Medicaid provided that a Qualified Income Trust is set up for her benefit and all her income is directed into the Qualified Income Trust.

Unfortunately, Mary can no longer understand enough to sign the trust and she did not execute a power of attorney for finances that could have provided Ben with the legal authority to execute a Qualified Income Trust.  This means that the family has to go through the guardianship process to obtain legal authority to execute the Qualified Income Trust.  If they had put proper planning in place ahead of time, they could have avoided the cost and time of guardianship. The good news is that Ben will get to keep everything but his wife’s income — all of the assets, all of his income, his house and vehicle — and still have Medicaid pay his wife’s nursing home costs.

This case study highlights the need of ensuring that proper estate planning documents are in place that are designed specifically to foresee possible need for Medicaid.  Having high quality documents in place can often alleviate stress for your family in a difficult time and mean that a costly guardianship can be avoided.

Disclaimer:  Information provided as a service of Kim Boyer, Certified Elder Law Attorney, updated as of 08/19/22. It does not constitute legal advice. For specific questions you should consult a qualified attorney.