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Don’t Make the Same Mistake Bill Made

The world is ever changing, and in recent years, with the technology boom, it seems that the rate of change has increased dramatically.  In the long term care world, we are seeing the same thing, and not in a good way.  We are receiving more calls lately from people in crisis, who we can’t help.  Years ago there was always something we could do.  Granted, the result would almost always be better had the call been made earlier, but still, there was something we could do. 

 Bill called us regarding his dad, who is now in a nursing home.   2 ½ years ago Dad transferred $300,000 to Bill and his brother.  Bill said he did this after speaking with friends who he said “had been through the Medicaid process”, his accountant and financial advisor.  He said if Dad needed nursing home care (he was living at home at the time of the transfer) he understood that he could apply for Medicaid, get a penalty assessed because of that transfer and then transfer 1/2 the money back to Dad, reducing the penalty.

 Bill was describing what is known as the reverse half a loaf strategy.  Transfer back a part of the assets, apply for Medicaid, receive a Medicaid penalty, or period of ineligibility and use the funds transferred back to cover that time period.  It all sounded good to him.  Except for one thing.  Earlier this year the State put a stop to the reverse half a loaf strategy.  I told Bill that he would need to either transfer all of the money back and use it for Dad’s care or keep the funds in his name and pay for Dad’s care for another 2 ½ years till the 5 year look back expires.

 That’s when Bill told me his problem.  He didn’t think he would need the other ½ of the $300,000 for Dad’s care and Dad wanted to pay for his grandkids college education so Bill only has enough to cover the next 1 ½ years.  Yet he won’t be able to get Medicaid for 2 ½ years.  Bill’s mistake is that he left himself with no other options.  He expected that things wouldn’t change, that his strategy would work exactly as he planned.  He never considered that the Medicaid rules could change.

 That’s a mistake people so often make when it comes to long term care planning.  They focus on one solution to the exclusion of all else.  But, predicting the future is a risky business.  What works today may not work tomorrow, which is why getting the right advice from someone who has been through the process so many times, such as a qualified elder law attorney, can make all the difference.  I didn’t have a great solution for Bill.  If Dad outlives the balance of $150,000, Bill and his brother will have to come up with the funds to pay for care for another year until he can get Medicaid.  At least he has 18 months to figure that out but that was little consolation for Bill.