Why do I Need to Plan for Medicaid? (Ie. Why Can’t I Just Give My Assets to My Children?)

In my previous post http://www.perlalaw.com/blog/hello-world/I discuss the cost of long-term care and the importance of planning for Medicaid.  This blog will try to dispel many of the misconceptions relating to Medicaid planning.  One such misconception is that a person can simply give away assets in order to qualify for long-term Medicaid.

When a person applies for Medicaid, he will be asked whether he or a spouse made any gifts within the last 60 months.  (Different rules apply to gifts made prior to 2/8/09).  This question is asked because a person will be penalized for any gift made within 60 months of his application for Medicaid if the gift was made for the purpose of long-term Medicaid eligibility.  For example:

Mom gives her daughter her home worth $200,000 and the contents of her bank accounts totaling $40,000 within 60 months of her application for Medicaid.  Mom’s penalty period will be 39.8 months. ($240,000 divided by $6,023 (private pay rate) = 39.8 months). 

This means that once Mom is in a nursing home and financially eligible for long-term Medicaid, meaning she has less than $1,500, the government will not pay for any of her long-term care for 39.8 months!  How will Mom pay for her care for the next 39.8 months? 

Mom made a terrible mistake that could have been avoided with proper Medicaid planning.  Moreover, an even more common mistake is to do nothing at all!  Failing to plan could result in the complete depletion of an individual’s lifesavings on long-term care.  Why spend all your hard earned money on care when you don’t need to?