Do Medicaid Plans Work?

Beware of "Medicaid plans" -- they often simply don't work. Usually the plans involve living trusts that don't work well for medicaid qualification.

-- By K. Gabriel Heiser, Attorney

You may have received one of those postcards promising in breathless prose how you can "save your home" and "protect your life savings" while immediately qualifying for nursing home Medicaid coverage. Too good to be true? Unfortunately, most likely yes. A recent case in Colorado brings this point home...

In 2002, Colorado Attorney General Ken Salazar alleged that an attorney, Robert Mason, together with his two sales assistants, peddled an illegal "Family Asset Protection Plan" that misrepresented to consumers

  • that such Plan would qualify consumers for Medicaid eligibility or for nursing home reimbursement costs;
  • that a revocable living trust under their Plan would shield a consumer's assets and enable consumers to qualify for Medicaid;
  • that avoiding probate by purchasing their Plan can save consumers a large percentage of their assets;

Apparently, this flawed "Plan" was promoted through numerous estate planning seminars held throughout the state. They targeted older consumers through direct mail and newspaper advertisements, and invited them to a "free seminar" on estate planning. The defendants charged consumers between $1,500 and $3,000 for the estate plans they knew were defective.

The lawsuit claimed that Mason and his crew engaged in the sale of "Family Asset Protection Plans" ("Estate Plans") which they falsely represented would shelter consumer's assets, therefore qualifying them for Medicaid payment of nursing home care expenses.

The lawsuit alleged the defendants represented that they could qualify consumers for Medicaid even if their income and assets exceeded the statutory limits for Medicaid eligibility. A "revocable living trust" was a primary feature of the plan touted by defendants.

Unfortunately, consumers who subsequently incurred nursing home costs were surprised to learn later that they were not qualified for Medicaid. Consumers also discovered that they had to pay for their nursing home care with their own funds or with long term care insurance, despite the assurances of the defendants that their Plan would qualify them for Medicaid.

At the conclusion of the 2004 trial, the judge awarded damages totaling more than $3 million to 334 victims, most of whom were elderly.

Unfortunately, such a case paints all of us Medicaid/estate planning attorneys in a bad light. The truth is, there are many legitimate techniques available to save families thousands of dollars and qualify for Medicaid sooner. And yes, sometimes that planning can indeed cost $2,000-$5,000 for the lawyer's time and document drafting expertise. However, there is certainly no "cookie cutter" plan available that an attorney can take off the shelf and put all his or her clients into, that would work its magic on them, instantly qualifying them all for Medicaid!

As for the attorney's promotion of the revocable living trust as a Medicaid planning device, see my article on this very topic. The bottom line is that a living trust can indeed have great utility for estate planning and probate avoidance, but it usually offers no benefits---and can even cause major problems---in a Medicaid planning context.

So a word to the wise: Beware the high-pressure seminars where "salesman" or "assistants" are lined up at the back of the room, selling one-size-fits-all solutions. Estate planning, and especially Medicaid planning, is an extremely complex area,requiring the application of the laws to your unique family situation, and a one-on-one meeting with an experienced elder law attorney. Don't look for a shortcut----especially one that costs thousands of dollars!

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. Read more about the problems with "medicaid trusts".

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The purpose of this feature is to stimulate discussion and share experiences regarding topics of interest. However, please note these submissions are not reviewed for legal accuracy. They may not apply to your situation and should not be considered legal advice. For specific legal advice you must consult with your attorney.

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