We meet with families on a regular basis who face long term care issues who make decisions based upon an incomplete understanding of the laws and rules concerning Medicaid. Sometimes the information is obtained from friends and relatives who have navigated the Medicaid system in another state. While Medicaid has Federal implications, it is administered on a state level and state laws impact this administration. Also, different rules apply for single and married persons so sometimes we hear that a family is making decisions based upon the rules as they would relate to a person of a different marital status. I have listed below a number of the common Medicaid misconceptions that I hear:
1. I have to spend all of my assets in order to get Medicaid.
Certain assets (including a home, a vehicle, certain burial plans, and a small amount of life insurance) are not countable assets when applying for Medicaid. Additionally, a married applicant’s spouse can keep a significant amount as the community spouse resource allowance. IRAs may also be exempt if an appropriate amount of income is withdrawn (however that amount is not necessarily RMD). In addition to these basic exemptions, extensive planning opportunities are available that allow applicants to keep substantially more assets.
2. I can only spend down my assets on nursing home expenses.
If long term nursing home care is required and Medicare and insurance benefits have been exhausted, you will need to pay all of the nursing home bill until you qualify for Medicaid benefits. However, you can spend money on a number of items that benefit you or your spouse. Many options are available under the Medicaid laws to speed up Medicaid qualification process and protect assets.
3. I can “hide” my money and then apply for Medicaid.
Intentionally providing false information on a Medicaid application is fraud, for which there are civil and criminal penalties. Our legal services include handling the Medicaid applications for our clients. We insulate our client from having to deal with the government; our clients find that this provides peace of mind. But whenever we file an application with the Department of Children and Families we fully disclose the facts. None of the legal planning involves hiding anything from the government. Full and honest disclosure is critical. Due to technological advances it is quite easy (and legal) for the IRS, Social Security and the Department of Children and Families and other government agencies to share information about your property and assets. Furthermore, you must sign a release allowing the Department of Children and Families to obtain financial information from financial institutions when you apply. One should never go into the asset protection planning process thinking that it will be possible to “hide” money or transactions.
4. I can give away $14,000 per year.
This misconception is actually a federal gift tax law that has nothing to do with Medicaid. In Florida a person is disqualified from Medicaid eligibility for one month for each $8,346.00 given away within the lookback period. This penalty period does not begin to run until after the applicant is otherwise eligible for benefits (already needing medical care and financially eligible for Medicaid). Therefore a $14,000 gift made within the lookback period will cause a period of ineligibility for the Medicaid applicant. It does not matter that the IRS will not impose a gift tax on this gift.