Imagine that your parent or another aging loved one suddenly finds themselves in need of nursing home care. If they haven’t already planned for the potential cost of long-term nursing care, they could find themselves in an incredibly compromised and vulnerable position. Because of the strict income and asset limitations that dictate who is eligible for Medicaid, your parents (or even you) may end up blowing through your life savings in order to pay for the cost of long-term care.

It is well known that Medicaid has a 5-year lookback period, so those who find themselves in immediate need of long-term care often assume there is nothing they can do to get qualified.

Fortunately, that is a myth. With the help of a qualified elder law attorney, Medicaid Crisis Planning could help you or your loved ones preserve some of their assets while becoming eligible for Medicaid.

What is Medicaid Crisis Planning?

About 70 percent of American seniors will need some type of long-term care planning, many of whom will find themselves in nursing homes. Because of the high nursing home costs—the median annual cost of a private room in a nursing home is over $100,000—it is important to meet with an elder law attorney to work out a detailed plan to prepare for this situation long in advance.

If, however, you find your loved one facing an unexpected health emergency that will likely require nursing home care, you do have options. For people who have assets significantly higher than the Medicaid threshold, the best of these options is Medicaid Crisis Planning. Medicaid Crisis Planning is a way to avoid spending down your entire life savings when faced with an immediate or near-immediate health situation.

How Does Medicaid Crisis Planning Work?

With Medicaid Crisis Planning, the person facing a nursing home visit gifts a large part of their assets—sometimes up to 50 percent—to a Medicaid Asset Protection Trust, or in some cases directly to a child or another loved one. The rest of the person’s assets are then converted to an income stream through a Medicaid Compliant Annuity (or in some states a promissory note) After these transfers are completed, the patient applies for Medicaid to cover the nursing home cost.

In most cases, the application will be approved subject to a penalty period.  That penalty period is based on the amount of the gift they have made to their child or other loved one (and any other transfers for less than fair market value that have been made in the past 5 years). During this period of ineligibility, (penalty period) the person will privately pay for nursing home care using their monthly income, as well as the funds produced by the annuity or payments from the promissory note or annuity. Once the ineligibility period has expired, Medicaid will start paying the monthly nursing home bill.

While the applicant will need to use some of their life savings initially, in the long-run, they will be able to salvage some of what they’ve worked a lifetime to accrue.

Long-Term Care Planning

With proper long-term care planning, you and your loved ones can be protected from having to spend down your entire life savings when faced with an unexpected nursing home admission—without the need for Medicaid Crisis Planning. An elder law attorney will help you protect your assets and guide you through which financial moves to make (or NOT make) as you age. For example, it may be advised that you set up a Medicaid Asset Protection Trust or purchase assets that are exempt from Medicaid.  This can prevent you from incurring a penalty, should you need to apply for nursing home Medicaid in the future.

The sooner you start planning for the cost of long-term nursing care, the better.  As it goes, an ounce of prevention is worth a pound of cure.

Whether you are interested in long-term care planning or find yourself in need of Medicaid Crisis Planning, it is important that you work with an experienced estate and elder law attorney. Elder law matters are as complicated as they are essential, so choosing the right professional can make all the difference.

At Miller Estate and Elder Law, we have many years of experience with long-term care planning and Medicaid Crisis Planning. Call (256) 251-2137 to speak with a member of our legal team today or contact us using the brief form below.