By Steven J. Gibbs, Esq.
Most of us cannot tell the future, yet preparing for the cost of long term medical care (or skilled nursing care) is always somewhat of a guessing game AND this is why elder law and pre-Medicaid planning should start early and be reviewed often.
Why Elder Law and Pre- Medicaid Planning Requires Some Fortune Telling?
This is a difficult and complicated area of law for all concerned?
For starters, Federal law governs programs such as Medicaid and Social Security and there is also an interrelationship between the Federal and the State laws. The rules are often difficult to interpret and the stakes are high because the client’s nest egg often hangs in the balance.
So with these high stakes and complicated rules, it would be nice to be able to tell the future when doing estate planning and specifically elder law planning. If we cannot tell the future, then how is this planning accomplished?
Whether you are at the life stage to consider elder law issues for yourself or an aging family member, telling the future means that you should look at the estate and the needs that may develop at least five years out. So this is about anticipation. Why is this important?
To answer this question it is first important to define the kinds of issues that arise when considering elder law planning (and pre-Medicaid planning) as part of your estate planning process. Elder law means we’re considering issues such as long term care costs for both assisted living, home care and care in a nursing home facility. There are a number of ways that these costs can be paid for and all of them require advance planning.
Medicare is an insurance plan that folks are eligible for at age 65 that has a deductible and co-pay. Furthermore, there is a qualification process which involves hospitalization that must be met. Medicare supplements are available for an additional cost and may cover things like the cost of the daily copay. Long term care insurance is private insurance purchased to pay for things like assisted living facilities, home care and hospice as well as services such as adult day care. There may be tax advantages as well as other benefits to purchasing long term care, particularly for those with medium sized estates.
Medicaid as opposed to Medicare is a needs based “means tested” government program designed to pay for long term nursing home care. Medicaid includes stringent asset limitations that must be met in order to qualify; however, there are numerous tools available to help folks qualify without “spending down” the entire estate.
Often times, when folks find out that Medicaid requires a “spend down” of the estate, they start asking about transferring assets to the children. Well, Medicaid thought ahead about this years ago and created a “look back” period for transfers which is now five years. This means that a transfer by a family member may result in a penalty which will delay that family member in qualifying for Medicaid.
There are many tools to allow applicants to keep assets and still qualify for Medicaid and these tools vary from state to state. Florida is especially favorable for this kind of planning in many ways. Notable planning options include irrevocable trusts and special needs trusts. Other elder planning options may be special qualified annuities and even reverse mortgages. Often times elder law planning is focused on allowing the well spouse to keep as much of the marital estate as possible while allowing the ill spouse to qualify for Medicaid. Other times, an adult child “caregiver” may need special protection while guiding the ill parent through the Medicaid approval process.
The “take away” for you is that elder law planning and pre-Medicaid planning should begin at least five years prior in anticipation of the expected care needed and especially the potential Medicaid application. Planning with anticipation allows the most flexibility when considering the five year look-
back period for transfers of assets. A transfer of any asset would include any change in ownership even where the change is to a trust or family member.
It is also important to remember that an outright transfer to children, even if planned in advance, is not always recommended due to the exposure of the assets to that adult child’s creditors and other risks such as divorce. As always, an experienced estate planner and elder law attorney should be engaged to determine the best course of action for the specific estate in question.
I hope this has offered some new perspective into the world of elder law estate planning and the importance of planning with anticipation.
Steven J. Gibbs, Esq.
Steven Gibbs founded the Gibbs Law Office in January 2009, committed to providing client-centered legal services.
Steve as he would rather be called, is not your typical attorney. If you appreciate the staunch egotistical mannerism of most firms, you will be delighted with Steve’s unpretentious approach to educating and then assisting his client. Instead of giving you his complacent and lofty ideas, he would rather pursue your expectations with professional conversation about resolving your concerns under the Law. It’s your life and it’s his job to make your legal expectations come true while using years of his guidance and knowledge.
Steve was admitted to the Minnesota Bar in 1999, the Florida Bar in 2007 and was recently admitted to the California bar. Keeping abreast of law changes in these three States, as well as the United States, assists him in all aspects of the types of law the firm practices.
Along his career path, he was an associate attorney for an insurance defense law firm; an in-house real estate negotiator for Target Corporation; and corporate counsel for Civix, LLC and Vice President for North American Properties where he was responsible for various real estate transactions, including legal issues and negotiating unresolved business issues. Prior to opening Gibbs Law Office, PLLC, he was an associate with the firm of Roberts & Engvalson, P.A. where he gained his knowledge of trusts, estate planing and Wills. He opened his own firm in 2008 and now focuses on laws that will enrich the needs of his clients throughout their lives and those of their children. The firm has developed a practice dealing only with Trusts and Estate Planning, Wills, Medicaid Planning, Elder Law, Real Estate, Business Law and Probate.
Quoting from Steve “I decided to practice in areas that families will need as they progress down life’s path. To help them with a solid foundation that will carry them throughout there lives is a rewarding experience for me and my staff.”