The conference rooms at our law firm locations are a petri dish of data. It is here that we learn the most common misconceptions people have about Medicaid, their finances, estate planning, and gifting assets. Here is the most common misconception: many people do not plan for retirement or long-term care because they think that government programs will provide them with affordable health care and a comfortable retirement. Unfortunately, that is not the case. The second biggest misconception is regarding gifting away assets. Once people realize the very low-income limits for Medicaid eligibility, they start gifting away money and assets to family members, thinking that this will reduce their income and make them eligible for Medicaid. Unfortunately, that is also not the case.
Let’s take a step back to see the full picture. With private health care insurance still a mess, having Medicare as your only health insurance is not even close to being enough. Medicare does not pay for long-term care, such as continued stay in a nursing home (“NH”) or an assisted living facility (“ALF”), which is something that many senior citizens will eventually need. Medicare will pay for approximately 100 days stay in a nursing home and that’s it. What happens after the 100 days when your family realizes you need to remain there? Florida’s average cost of a NH or ALF ranges from $8,000-$14,000 per month while the average Social Security retirement income is $1,461 per month. The numbers show that your assets and any inheritance you planned to leave to your family will deplete quickly.
That means that you will need a combination of Medicare and Medicaid to meet your healthcare needs. Yet getting approved for Medicaid, specifically the Medicaid Institutional Care Program (ICP), which pays for nursing home and assisted living facility room, board & care is very tricky. To qualify for Medicaid in Florida in 2019, an individual may have not more than $2,313 per month in income and no more than $2,000 per month in assets. Many people erroneously think that simply gifting assets way in order to bring down their limit is the solution. In fact, that is the worst thing you can do as you are setting yourself up for a “penalty period.”
One of the keys to understanding Medicaid planning is to understand how the “look back period” and “penalty period” works. You need to know that when you are planning to apply for Medicaid to pay for long-term medical care, you cannot simply transfer assets out of your name to third parties for less than fair market value, and then try to apply. Likewise, giving your assets to your children “to hold for you” means you no longer have any control over this money and a harsh Medicaid penalty will likely apply. This is a very common mistake people make when they transfer assets to adult children without considering the ramifications.
The Deficit Reduction Act of 2005 increased the look-back period to 5 years and changed the penalty period, so it now begins from the time of eligibility and not from the time of application. In practical effect, this means if someone made a prohibited transfer (gifted away money or assets) in the last five years and then applies for Medicaid, the penalty period will not start until the person has spent down the assets to the limit. Simply stated, the penalty period is a period of time that a person will NOT receive their Medicaid benefits (even after being approved for Medicaid). The duration of the penalty period is calculated by an algorithm created by Medicaid and used to make the determination whether to accept the penalty period or undo the gift (pay the gift back) that was initially made by the Medicaid applicant. Prior to filing your Medicaid application, these “gifts” will need to be corrected, paid back to you, or otherwise fully dealt with according to Medicaid eligibility guidelines.
Under current laws, Florida Medicaid planning is often a game plan of safeguarding as many of your assets as possible, while allowing you to qualify for Medicaid. If you or a loved one is facing the possible need for future care in a nursing home, proactive Medicaid Planning may be a solution. This type of sophisticated planning should only be done with an elder law attorney. Our elder law attorneys employ legal and ethical methods as listed under the Florida Department of Children and Families (“DCF”) website, that will transfer your assets so that you may qualify for Medicaid later in life. Below are some of the strategies employed by our elder law attorneys in order to preserve your assets and make you eligible to get your long-term medical costs covered.
Strategies Used to Qualify you for Medicaid (vary situationally)
- Use of exempt assets, such as your homestead, if you, your spouse or children live there
- Remodel or upgrade of your homestead
- Curing the Medicaid penalty period for any gifts made in the past 5 years
- Personal Services Contracts to compensate family members for providing necessary services in accordance with daily living
- Qualified Income Trusts (“QIT”)
- Special Care Trusts
- Use of rental real estate
- Other traditional spend down options (such as home remodel, prepaid funeral services, car purchase, etc.)
Contact OC Estate & Elder Law at (954) 251-0332 or info@ocestatelawyers.com for a free consultation to learn more about Medicaid eligibility including which assets are exempt under Florida law, how the penalty period applies to your particular situation, and the specific Medicaid eligibility strategies we recommend for you. Our attorneys are fluent in English, Spanish and Russian.
