A basic understanding of Medicaid qualification helps address planning concerns for your estate surrounding long term care and the passing of assets to a surviving spouse or to children.
If your estate plan includes assets passing outright to your spouse without creating a trust for that spouse, your plan should be reviewed to consider additional asset protection techniques.
If your plan already establishes a trust for a surviving spouse, review is still necessary periodically to ensure the plan continues to comply with updated laws around Medicaid qualification.
Review of your plan ensures that it continues to comply with updated laws around Medicaid qualification. This helps protect your assets and contributes to financial stability over the long term.
There are two types of planning for Medicaid: preplanning and crisis planning. As you might imagine, preplanning, which means reviewing your current estate plan, and changing it if necessary, is preferable. Crisis planning occurs when a person with diminished capacity has immediate full time care needs.
Medicare v. Medicaid.
Medicare is the federal health insurance program created in 1965 that covers people 65 and over and those with certain long term disabilities, regardless of income, medical history or health status.
Medicaid is a needs based program that evaluates a person's income, resources, and medical disability to determine eligibility. It is funded by the federal and state governments, and benefits vary greatly among states.
Overview of Essential Medicaid Facts.
Medicaid qualification involves a three-prong test:
1. Medical necessity. A person must require care in an institution due to their inability to perform activities of daily living, such as dressing, feeding themselves, or taking medication as determined by a written medical assessment.
2. Income test. Income is currently limited to $2,382. A person with income over the limit can still qualify for Medicaid up to a specific income cap if they create an income trust and pay the excess income to the care facility.
3. Resource test. Countable resources are limited to $2,000, but there are exemptions: equity value in a primary residence; a vehicle of any value; pre-paid burial plan; life insurance up to $1,500; personal belongings and household furnishings. A married person is allowed a community spouse resource allowance.
The countable resource exemptions for a married person may be higher than you realize. Single applicants face greater limitations on retaining the value of property but there are planning strategies to help retain the value of the applicant's estate. Some ideas are: having a caregiver child reside in the home for at least two years when such care enables the disabled person to stay at home rather than in a facility; converting a resource to an income stream with an annuity; using a reverse mortgage to stay in the home; and having the disabled person buy a life estate in the child's home.
There are other planning strategies including a wide range of trusts that can help you best create financial stability and asset protection. Please call 307.200.1914 for a free consultation.
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