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Failing to plan for Medicaid as you age could reduce your legacy

On Behalf of | Oct 12, 2022 | Health Care Planning

Many people start Medicaid planning out of concern for their own well-being. They recognize that they may need to move into a nursing home in a few decades and may not have the resources to pay for that care.

Advance planning for Medicaid allows people to quickly qualify for benefits when they need them without having to worry about a penalty. Those who make gifts and transfers in the months before they apply for Medicaid will likely have to worry about a penalty.

The state will determine a set number of months that you have to pay for your own care based on the value of the assets you gave away or transferred. You could experience serious financial hardship while waiting for Medicaid to start covering your care costs. For some people, it is not concern about their own medical needs but rather a desire to provide for their families that will inspire them to plan for Medicaid.

The state wants you to pay back your Medicaid benefits

Advance planning may be the only way to protect your loved ones from losing their inheritance because of your Medicaid benefits. In theory, you have contributed to Medicaid and similar benefit programs throughout your working life. Unfortunately, when you need Medicaid benefits, the state may demand that you pay back whatever you receive.

The Medicaid estate recovery program will bring a claim against the assets in someone’s name when they die. The state can ask the probate courts to award them the total value of any medical care that Medicaid covered. That might mean that your estate has to pay for five years of nursing home care. The probate courts can order your estate to liquidate your assets, including your primary residence, to repay your Medicaid benefits.

Advance planning can protect certain assets

If you plan ahead to improve your eligibility for Medicaid when the time comes and to avoid penalties and recovery efforts, you protect yourself and the people that you love. By changing the ownership of your most valuable property, moving assets into a trust and making strategic gifts, you can protect specific assets from Medicaid estate recovery efforts.

Understanding the value derived from Medicaid planning could motivate you to plan for such benefits when creating your estate plan or preparing for retirement.