7 Worst Medicaid Planning Mistakes
It never fails – someone comes into my office concerned about their spouse or their parent who needs to qualify for Medicaid (to help pay for nursing home care), and they want confirmation that the action they took that was recommended to them by their neighbor, friend, financial planner….was the right thing to do, only to have me tell them – nope, that won’t work. And then I hear, “But, my neighbor said they did this for their parent…” or “But, my friend at church said I could do this…” or “But, my financial planner said….” and so on. This has prompted me to write about the six worst planning mistakes one can make with regards to Medicaid in Florida.
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Adding a child or children on title to the homestead (i.e., quitclaiming an interest to your child)- why would you do that? Because, you want to make sure the property doesn’t go through probate at your death? Because, you want to make sure the nursing home doesn’t take the house? Well, adding a child to the deed is a gift and this will disqualify you from nursing home Medicaid benefits if it was done within the last five years prior to filing the Medicaid application. The exception to that is if your child has lived in the home with you and has taken care of you for at least two years and, but for your care, you were able to stay out of a nursing home. If that is the case, under federal and state law, you can transfer the home to a caregiver child without incurring a penalty. In Florida, however, this is rarely necessary to do because Medicaid will never have a lien against your homestead (nor will any other creditor), if it is your homestead and it is passing to your heirs under Florida law (spouse, children, etc.). If you are interested in avoiding probate of the homestead, there are other ways to do that - and I've discussed that previously – see my article on enhanced life estate deeds – http://ohalllaw.com/2014/04/avoid-probate-homestead-real-estate/
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Giving away money to one or more children (or grandchildren, or anyone else for that matter). If you are giving your money to your children, and they are married, you might as well have given it to their spouse, or their creditors, or their children…..take your pick. The key thing to understand is, if you give it away, you gave it away. Gifts (that includes monetary gifts, gifting real estate or other property, taking your name off of a bank or investment account and leaving their name on it, etc.), for Medicaid purposes, incur a penalty and there is a five year look-back period for giving money or other assets away. If you can get the family member who you gave the money to, to give it back to you, then you can cure the gift problem.
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Leaving the nursing home before a Medicaid application is filed. Many times, clients want to have help in the home or help to pay for an assisted living facility. They think that Medicaid will help pay for that. Yes, there are Medicaid programs that can help pay for that, however, there is a long waiting list in Florida (30,000 or more people) to obtain benefits for those “home and community based” programs (there is not a waiting list for skilled nursing care). If you are in a skilled nursing facility for at least 60 days, and can obtain Medicaid benefits while you are there, then you can transition back into the community (either assisted living or home) and you can by-pass the waiting list.
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Asking your friends, neighbors or family members for legal advice on Medicaid planning. This is a pet peeve for me. You go to an attorney to review your legal issues and rely on their expertise to help you with the problem, just like you go to a doctor to diagnose what your medical issue is and help you to feel better. Your attorney has studied the rules of law and has experience in the particular issues you are seeing him or her for. If they do not appear to have experience, then you should find someone else. However, your friends, neighbors and family members do not have legal expertise and most likely do not understand the intricacies of the law (especially when it comes to something as complicated as Medicaid or Estate planning). Chances are, they are giving you “bad” advice.
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Not having done your basic estate planning. What is basic estate planning? Documents which include a Last Will and Testament, Durable Power of Attorney, Living Will and Health Care Surrogate are the basic documents that all adults should have. Many people think that they do not need these documents until they are much older. However, as I have said before, Terri Schiavo is the perfect example why anyone who is 18 or older should have their estate planning documents in order. You never know when you will become incapacitated and need someone to make financial or health care decisions for you. You should be prepared for that time and name the people you trust to make the right decisions.
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Forgetting to make your children beneficiaries on your accounts. In Florida, Medicaid can only have a lien against assets that go through probate. If you have beneficiaries (“P.O.D. – payable on death for bank accounts, or beneficiaries listed on life insurance or other investment accounts) listed on your accounts, these assets do not go through probate and creditors, including Medicaid, cannot get at these assets.
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You are talked into purchasing a tax-deferred annuity….and you are 80 or older. If you are 80, it is very likely that your life expectancy will not exceed the penalty period for making withdrawals on a deferred annuity. If you need to cash it in (because you have bills to pay, such as nursing home bills), you will have a penalty to pay. Also, deferred annuities count against you as an asset for Medicaid purposes so be very leery of a financial advisor who tells you that you can qualify for Medicaid with a deferred annuity. There are annuities that will be allowed by Medicaid but there are strict rules that must be followed in order for the annuity to be allowed, including naming the state of Florida as a beneficiary of the annuity to the extent Medicaid has provided benefits on behalf of the annuitant.
