Do It Yourself Medicaid Planning

Medicaid planning is complex and the rules are constantly changing. Something that worked for your neighbor may or may not work for you. You need to talk to an experienced elder law attorney. Here's why.

-- By K. Gabriel Heiser, Attorney

Clients sometimes come to me having already done some home-brew Medicaid planning, probably because they got some tips from their neighbor or simply were afraid of the perceived high cost of lawyers. However, this is one area where you definitely do not want to do-it-yourself!

First, the facts of your neighbor's situation are surely different from yours, in ways you may not realize even matter. For example, the income of your neighbor's parent, cost of the nursing home in question, his parent's health and life expectancy, may all differ from that of your situation. Yet each of these factors will most likely change what is advisable to do or suggest alternative approaches to an experienced elder law attorney who regularly advises about Medicaid issues.

Second, the laws change frequently. So even if your situation were exactly the same as that of your neighbor, the rules of the game may have changed in the months or years since your neighbor's advice made sense. For example, when Congress passed the Deficit Reduction Act of 2005 on February 8, 2006, the "lookback period" (which penalized gifts that were made a certain number of months before a Medicaid application) was extended from 36 to 60 months. Applying even one month too soon, following a large gift, could have disastrous financial consequences. It pays to know the rules!

Third, your family situation may differ from your neighbor's in ways he may not be aware of, and even if he were aware of, he may not realize the importance of such a situation: there may be safe-harbors and exclusions that apply to your particular family situation that your neighbor may not have heard of. For example, you may have a sibling who is "disabled" as defined by the Social Security Administration: one exception to the general rule that making a gift causes a period of disqualification from Medicaid benefits, is making that gift to a trust for the benefit of a disabled child (of any age).

Fourth, most people don't realize the major differences from state to state in many of the Medicaid rules. Although the basic framework for the entire Medicaid program is set by the federal government, with many of the rules required to be the same in every state, there are also many sections of the Medicaid law that allow each state to set its own rules, within certain limits. So what may have worked for your neighbor's mother in Florida won't fly in Colorado.

Fifth, the "imaginative" asset shifting technique your neighbor's mother utilized may indeed have "worked"---that one time, with that one caseworker. That is certainly no guarantee that your parent will be so lucky with the same technique. You may not want to risk the consequences of such a technique failing; your attorney can help you assess the risks and together you can make an informed decision.

As you can see, this is an area fraught with complications. Asking your neighbor's advice about the best computer or car to buy is one thing, but you proceed at your own peril if you rely on the neighbor for Medicaid planning!

K. Gabriel Heiser is an attorney with over 25 years experience in elder law and estate planning. Heiser is the author of “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets,” an annually updated practical guide for the layperson. For more information about this book, visit Medicaid Secrets. We feel similarly about do-it-yourself living trusts.

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