It’s never too late to save money. If, however, you wanted to save 100% of your money, you should have started planning five years before you needed Medicaid (through a Medicaid asset protection trust). You can give assets away, but any assets you give are counted for five years against you for Medicaid purposes.
Most of my clients who come to me who haven’t done any sort of pre-Medicaid planning, nor have they set aside assets. The rule of thumb is that if you’re married and the first spouse needs to go into a nursing home, I can save 100% of your money—at least nine out of ten times. If your resources are vast, let’s say over half a million, then you may not be able to save all of it, but we can help you save most of it. Most of my clients are not worth more than half a million dollars, which is why they’re looking for Medicaid. If you’re not married and you’re single, I can still save half of your estate at that time, assuming it’s not over $500,000.
Even without proper planning, you can always make gifts after you’re in a nursing home to protect assets and give assets to children while you’re still qualifying for Medicaid. So, it’s never too late; the worst you can save is half, but you might be able to save 100% of your resources if you plan ahead.
What Are Some of the Biggest Mistakes That You’ve Seen People Make When It Comes to Elder Care Planning or Medicaid Planning? What Could They Have Done Differently With Your Assistance?
First of all, one of the biggest mistakes that I see is people having a revocable living trust, which preserves assets from having to go to probate but does no Medicaid planning for them. Instead, I would advise them to look at protecting their home, and there are a number of ways to do that. We can protect the home through what we call a life estate deed or maybe with a Medicaid residential trust, which protects the home long-term from having to be liquidated to pay for a nursing home bill after your death. It will also take the home off the table so that if you sell it while you’re in a nursing home, it doesn’t disqualify you and protects the proceeds.
Another mistake I see is parents deeding their house to their children outright. That’s a terrible mistake for a number of reasons. First of all, it counts against them for five years, which becomes an issue if you need Medicaid within that five-year period. There are also a number of problems that come with deeding your house to someone, the most obvious being that the house is not yours anymore. If your child gets sued by a creditor or they get divorced or whatever, your home is now subject to their creditors, and you might have to move out. Let’s say you did deed your home to your children five years before you need Medicaid; when you pass away, if your children decide to sell the house, they’ll have to pay capital gains on that sale for whatever you paid. So, that’s not a good option.
Instead, I recommend putting your house in a trust that will preserve your tax exclusions upon your death and make it to where your children don’t have to pay taxes. It would take it off the table for Medicaid planning in advance, and it would also preserve the proceeds if you sell it while you’re in a nursing home.
I see these two mistakes—relying on a revocable living trust for Medicaid planning and deeding your house to your children—on a regular basis. There are better ways to plan for Medicaid.