Medicaid Planning refers specifically to protecting as many assets as possible from exposure to medical care costs and with specific attention paid to the costs of long-term care. Long-term care refers to any care received from which there is not expected to be any meaningful recovery to the condition present before the beginning of treatment. This includes both full-time supervised nursing home care and common issues like diabetes. In either case, improvement is not the goal of long-term care and treatment focuses on improving the quality of life and the ability to manage the care. While diabetes is a long-term care condition which requires planning in its own right, Medicaid Planning specifically plans for those ailments which do or are likely to cause significant expenses which will either consume most or all of the assets of the person afflicted. Some examples of these conditions include:
- Parkinsons disease
- Amyotrophic lateral sclerosis (ALS)
- Traumatic brain injuries
- Severe Autism
- Down Syndrome
- Obsessive-Compulsive Disorder
- Severe Bi-Polar
- Multiple Personality Disorder
- Severe Post Traumatic Stress Disorder
- Williams Syndrome
- Severe Depression
As is evident from the list, these are not all age-related issues but can affect from prenatal throughout life. Anyone can be affected by any of the physical or mental issues and with the high cost of healthcare, entire estates can be wiped out paying for just the medical bills. Medicaid planning seeks to minimize the amount of the estate which is available to pay these bills so that the government is the responsible party.
Medicaid planning importantly should be done in advance of its need, whether in the protection of your assets or in the protection of assets intended for a beneficiary. If it is for your assets, Medicaid currently has a 'five-year lookback' rule for any assets you transfer out of your name. What this means is that if you want to shield assets from potential medical expenses, you need to give them away, irrevocably, five years before you apply for government benefits. This is best accomplished by giving them away to a place where if you happen to not make it five years, you can get them back without issue. This is also why it is a horrible idea to give away assets to children or other beneficiaries as if you fail to make it the five years, or need the assets back for another reason, you are unlikely to be able to get the assets returned to you resulting in a penalty period where the government will not pay for your care. This may not mean you will not receive care, but it will mean that the entity you owe money to, be it a doctor, nursing home or another facility, will go after any or all of your children to recoup those costs.
If you are protecting assets for your beneficiaries, the best way to accomplish this is to determine whether or not they are already eligible for government benefits due to their condition, in which case it is best to set up a third-party special needs trust without a payback provision or have a provision in all of your documents that if a beneficiary is a special needs person at the time of your death, they do not receive their benefit outright but in a special needs trust. In this manner, you can ensure that they receive both the government benefits and the additional benefits afforded by their trust. See more detail in the practice area on special needs.