Confusing Medicaid with Other Government Programs (Part 2)

                Last week I was telling you about the call I received from Lou.  His dad had been living in senior housing but now needs nursing home care.  Dad has $80,000 left in assets which he plans to spend down and then apply for Medicaid.

                When I asked Lou about gifts and other transactions over the past 5 years he told me that his dad had set up an irrevocable trust just before applying for senior housing.  Since it wasn’t a problem in terms of qualifying for the housing program, Lou figured it would be the same for Medicaid but he was wrong.

                That’s because the housing program focused on income and not assets.  How much income he had, determined his eligibility as well as how much rent he paid.   I explained to Lou that the irrevocable trust assets were only relevant so far as the income generated from them (ie. interest or dividends).  Keep in mind that there are different housing programs that can sometimes have different rules but many of the programs work this way.

                Medicaid, on the other hand, does look at the assets.  First, I told Lou that just because his dad has an irrevocable trust doesn’t automatically mean the assets are  exempt for Medicaid purposes.  I would have to examine the type of trust to be sure.  Additionally, we have the 5 year Medicaid look back to contend with.  Since the assets were placed into the trust only 3 years  ago, I told Lou his dad wouldn’t be Medicaid eligible yet.  So, what should he do?

                Lou has two options.  He can transfer the assets back to dad and spend them down or he can keep the assets in the trust but must private pay for another two years before applying.  The best option depends on how much is in the trust and what the cost of care will be going forward.  Once we know this information we can determine the best course of action.

                Lou wasn’t thrilled with the answer but unfortunately he can’t turn the clock back now.  But what should he have done if he could go back in time?  He should have planned for the possibility of Medicaid sooner, recognizing that qualifying for senior housing wouldn’t solve his long term care problem.  Navigating through the various government programs isn’t easy but getting the right advice can potentially save tens and even hundreds of thousands of dollars.  Just ask Lou.

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