The complexities surrounding Medicaid eligibility requirements can make Medicaid planning a stressful, daunting process. You have to be aware of the strict asset and income limits you must maintain, as well as the penalties that can result in a loss of coverage or money owed to the state if the planning is not done correctly. It’s best to consult with an experienced elder law attorney if you or a loved one plan to rely on Medicaid coverage in the future. This way, you can make sure your strategies are sound and don’t cost you thousands of dollars, or worse, the opportunity to secure quality long-term care.
To understand how Medicaid planning strategies work, it’s important to know why certain strategies do not work anymore. Prior to 2006, seniors who planned to receive Medicaid would often gift half of their assets to a family member, while keeping the other half to pay for Medicaid during a penalty period. This was called Half a Loaf planning, and it worked because the penalty periods began when the gift was made. The calculated penalties were then rounded down so recipients would have shorter penalty periods. However, with the passage of the Deficit Reduction Act, which was not implemented in Florida until November 1, 2007, the Medicaid transfer penalty does not begin until an individual applies for Medicaid and the asset and income levels are met.
Annuities, which are large amounts of cash paid for future payments guaranteed during a person’s lifetime, were another common way to plan for Medicaid. This allowed a person to leave a legacy for their family while still receiving Medicaid, but additions to the law make annuity planning much more difficult. Typically, an annuity would be purchased for the spouse who is not applying for or receiving Medicaid benefits, since only the income of the applicant is counted for Medicaid income eligibility. This way, the annuity would instead count as income for the other spouse.
Prior to 2006, the rules surrounding annuities for Medicaid planning were fairly simple: they could be made privately between families, were only based on life expectancy, and the monthly payments could vary in amounts. Since the changes to the law, however, annuities must be purchased commercially, the payments must be made for roughly the same amount each month, and the state must be listed as the beneficiary on any annuity contract. This last part makes it so that in the event of the individual’s death, the state can then collect the money for payments made on the person’s behalf.
Medicaid planning can have a serious impact on your financial situation if done incorrectly. If you’d like to learn more about Medicaid planning, or if you’ve been denied Medicaid coverage and would like to appeal the decision, please contact us at (813) 438-8503 to schedule a consultation.