For Louisiana families who cannot offset long-term care costs with their income, Medicaid often becomes necessary. Once a family depletes assets below a certain level, the person needing long-term care becomes eligible for Medicaid. Typically, families deplete their resources by simply spending out of pocket for their initial long-term care costs. Once the depletion is complete, Medicaid then foots the bill for the bulk of the long-term care costs. However, more savvy families will deplete their resources in other ways where resources shift into a Trust and remain preserved. Medicaid pays the long-term care bill while the assets remain in tact for the family in Trust. We call this trust-based strategy Medicaid Planning. However, before engaging an attorney for assistance with Medicaid Planning, you must know the penalties imposed by Medicaid when your execution of this strategy deviates from what is allowable.
Generally, the key aspect of Medicaid planning involves the timing of transfers for less than fair market value (aka gifts). Asset transfers to specially designed trusts or other individuals must typically occur at least five years before applying for Medicaid. So what about transfers occurring in the five years just before applying for Medicaid coverage? If Medicaid discovers transfers occurring in that five year period, they impose a penalty based on the amount transferred. The penalty is one month for every $5,000.00 transferred during the five year look-back window. For example, the penalty for a $100,000.00 transfer to a trust or individual in the five year window is 20 months. The penalty essentially creates a waiting period before Medicaid will begin covering long-term care costs. Even if an individual has a low enough level of assets to otherwise qualify for Medicaid, Medicaid refuses to pay during this penalty period.
Medicaid planning is not a do-it-yourself endeavor. Work with an attorney familiar with Medicaid regulations who can advise you on the pros and cons of various strategies. In this way, you can avoid the potential penalties and pitfalls that arise when you cut corners. If you are interested in avoiding penalties and preserving assets for your family with Medicaid planning call Legacy Law Center at (504) 274-1980 in Metairie, New Orleans, and surrounding areas or call (985) 246-3020 in Mandeville, Covington, Slidell, Houma, and Thibodaux.