As you grow older, one thing you want to do is to protect the assets you’ve accumulated over time. You’ve worked hard, and you don’t want to see everything you’ve earned depleted to pay for your nursing home care or other needs.
One thing you can do to protect yourself and interests is to look into Medicaid planning. Planning ahead of time means you can make decisions that save more of your assets while helping you qualify for Medicaid at the same time.
Medicaid: The low-income solution
Medicaid is designed to provide health coverage to low-income individuals including children, adults and seniors. Many older adults are also enrolled in Medicare while obtaining Medicaid. The difference is that Medicaid is only available to those who qualify based on income.
If you’re someone who has many assets to your name, you’ll have to spend down those assets before you can receive Medicaid. That’s not an option for some people, who don’t want to see their hard-earned money go to a nursing home instead of their heirs. So, what can you do?
Taking the penalty period
If you don’t need Medicaid right now, then one option is to look into taking a penalty period. If you give away a large portion of money or assets to your heirs, then you’ll have a period of time between the gift date and when you can obtain Medicaid. This to help avoid fraud, where someone would give away large portions of income and immediately qualify for Medicaid.
The trick is that you don’t want to need the nursing home during the penalty period. If you do need nursing home care, then you’ll have to pay out of pocket for the penalty period, which may mean you’ll have to rely on others to use the very money you tried to protect.
A better option is to give away just a portion of what you have to your family, take a penalty period, and then pay for your care until Medicaid kicks in with the money you kept. For instance, if you have $100,000 and give away $50,000, there may be a 10-month waiting period for Medicaid. You have $50,000 left to spend before you qualify, so by spending $5,000 a month, you’ll pay for your care for the 10 months and then get Medicaid in the end. The added benefit is that your family will get the other $50,000, no questions asked.
As you can see, this an extremely complicated situation, but it is possible to save at least a portion of your assets even if you didn’t plan for nursing home care.