Unfortunately, many nursing home residents end up exhausting their assets on long-term care, but it doesn’t have to be that way. The best time to plan for the possibility of nursing home care is when you’re still healthy. By doing so, you may be able to pay for your long-term care and protect assets for your loved ones. You worked all of your life to pay off your mortgage and build a retirement fund. You expected to live off your savings in the comfort of your own home, and you planned to leave something to your kids at the appropriate time. Suddenly, the unthinkable happens–you suffer a stroke at age 70 and must spend the rest of your years in a nursing home. What will happen to your life savings? Medicaid planning can protect you and your assets and DDV Law, Ltd. is here to help you every step of the way.
There’s a lot of information to digest when it comes to medicaid and some concepts can be hard to comprehend. As a start, here are 10 myths and misconceptions about Medicaid:
Myth 1
“I can take assets out of my name and immediately qualify for Medicaid”
That is incorrect. Any gift made within 5 years of a Medicaid application and will be scrutinized and may be subjected to a penalty period or ineligibility. However, there are some exceptions for “allowable” transfers or gifts to certain family members. You should check with an attorney to determine if any exceptions apply in your case.
Myth 2
“I can give away $14,000 per person per year and still qualify for Medicaid”
That is incorrect. The $14,000 per year annual gift tax exclusions applies to whether taxes are incurred on a gift and have nothing to do with the laws of the Medicaid program.
Myth 3
“I can sell my house for $1 and qualify for Medicaid”
This is also incorrect. Any sale of property must be for fair market value or the transfer may be treated as a gift and is subject to a penalty period.
Myth 4
“My house is an exempt asset and if I go on Medicaid, I can keep my house”
The Federal law does indicate the house should be treated as an exempt asset if there is an intent to return home. If this intent cannot be proved, maintaining the house as an exempt asset is difficult. Further, this does not preclude the State of Illinois from imposing a lien on the homestead for the cost of medical care.
Myth 5
“I can transfer 50% of my assets to my spouse and then qualify for Medicaid for myself”
Not necessarily. In Illinois, the law allows a transfer of certain exempt assets and up to $109,560 in non-exempt assets to a spouse.
Myth 6
“I can give my home to my daughter who resides with me”
In some situations, this is true, but there are certain facts that must be established to determine whether such a transfer is allowable. A non-allowable transfer will result in a penalty period.
Myth 7
“I have a Living Trust, so this will protect my assets if I have to go on Medicaid”
No, since a living trust usually allows distributions of income and principal to the creator, a Living Trust is not an exempt asset and must be counted towards the cost of care.
Myth 8
“There is a 3 year look-back period”
No, the look-back period was changed to 5 years in 2012.
Myth 9
“If I am a child on disability, all assets of my mother (who suffers from dementia) may be transferred to me”
While the statute allows for transfers to a child on disability, whether a transfer may occur depends on a number of factors, including whether there is a power of attorney that authorizes such a transfer. If such a transfer is not authorized, then a court order may be sought to authorize the transfer.
Myth 10
“I should file for Medicaid on my own without the assistance of an attorney”
It has become more cumbersome and difficult to apply for Medicaid. Many people seek the assistance of an attorney to assist them with legal asset protection and to work with the Department to ensure an accurate and correct Medicaid approval is received.
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