Medicaid is a need-based, jointly administered federal/state government health insurance program. It is potentially available to people of all ages.
Medicare is another government health insurance program, but it is not based on financial need. You qualify for Medicare by earning retirement credits as you are working and paying taxes throughout your life. You can earn as many as 10 credits per year. Once you earn 40 credits, you will qualify for Medicare when you reach the age of 65.
You may naturally wonder why Medicaid would be relevant to you if you are going to qualify for Medicare as a senior citizen. The reason why Medicaid is important to many seniors is because Medicare will not pay for living assistance.
Medicare won’t pay for custodial care. If you need help with your activities of daily living, this is considered to be custodial care rather than medical care or convalescent care.
Medicaid will pay for long-term care.
Medicaid Spend Down
Because of the upper asset and income limits, people often spend down in an effort to gain Medicaid eligibility. You basically spend or give away your assets in advance of applying for Medicaid. When you actually apply, you have virtually nothing left in your own name, and your eligibility is granted.
This is more complicated than it sounds because of the five year look back period. The Medicaid program does not want you to be able to give away all of your assets today and qualify for Medicaid tomorrow. That’s not consistent with the intent of the program.
The five year look back prevents you from qualifying for Medicaid if you give away assets within five years of applying. Because of the look back, effective Medicaid planning takes foresight.
Now that we have provided the appropriate background information, we can get to the point of this post. You could create a trust as part of a Medicaid plan. It would have to be an irrevocable trust, so you would be surrendering control of the assets.
You could potentially receive income from the earnings, but you would not be able to change the terms of the trust or act as the trustee. Medicaid would not count assets that you have conveyed into this type of trust when they are evaluating your financial capabilities.
That’s the good part. The major disadvantage comes with the surrender of control. Since you have to plan ahead so far in advance, you may be divesting yourself of these resources before you know if you will ever need Medicaid coverage. In addition to this, you may simply need the money yourself for some reason or another.
Medicaid Planning Consultation
There is a lot to take into consideration if you are interested in obtaining Medicaid eligibility late in your life. If you would like to discuss the matter with a licensed elder law attorney, contact our firm to schedule a free consultation.