The 9 most common myths of Medicaid and Medicaid Planning

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Presented to the Rhode Island chapter of the Alzheimer's Association on Oct. 3, 2013. This talk was Part 4 of the "Getting Started Education Series", given at The Highlands on the East Side, in Providence, RI.

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The 9 most common myths of Medicaid and Medicaid Planning

  1. 1. The 9 most common myths ofThe 9 most common myths of Medicaid & Medicaid PlanningMedicaid & Medicaid Planning Mark B. Heffner, Esq.Mark B. Heffner, Esq. Heffner & AssociatesHeffner & Associates 615 Jefferson Boulevard615 Jefferson Boulevard Warwick, Rhode IslandWarwick, Rhode Island www.hefflaw.comwww.hefflaw.com 401-737-1600401-737-1600
  2. 2. DISCLAIMERDISCLAIMER • Presentation based on CURRENT RHODE ISLAND Regulations and Policy, which are subject to change at any time. • Medicaid eligibility is STATE-SPECIFIC. Even variations within State depending on regional office • General presentation for educational purposes only. No substitute for individual consultation with COMPETENT Medicaid lawyer in particular State.
  3. 3. HEFFNER & ASSOCIATES ELDER LAW MYTH #1 “MEDICARE AND BLUE CROSS WILL COVER IT” • Medicare & Medigap supplements such as Blue Cross Plan 65 and Blue Chip only small fraction of nursing homes residents at any given time. • Many residents never receive Medicare coverage. • For those who do, most people are NOT covered for the full 100 days and many have substantial co-pays during the period they receive skilled benefits.
  4. 4. HEFFNER & ASSOCIATES ELDER LAW MYTH #2 “IT’S TOO LATE—WE SHOULD HAVE DONE THIS 5 YEARS AGO” • It is not too late to pursue effective asset protection planning, even after someone enters a nursing home. • Plan may include purchase of “exempt” assets (“spenddown”), transfers which do not create ineligibility, calculated transfers. Text
  5. 5. HEFFNER & ASSOCIATES ELDER LAW MYTH #2 “IT’S TOO LATE—WE SHOULD HAVE DONE THIS 5 YEARS AGO” • Examples for single people: • Plan may include purchase of “exempt” assets (“spenddown”), transfers which do not create ineligibility, calculated transfers (e.g. “reverse half a loaf”)
  6. 6. HEFFNER & ASSOCIATES ELDER LAW MYTH #2 “IT’S TOO LATE—WE SHOULD HAVE DONE THIS 5 YEARS AGO” • Significant opportunities for married couples—e.g., purchase of Medicaid- qualifying annuities, revisions to community spouse estate plan.
  7. 7. HEFFNER & ASSOCIATES ELDER LAW MYTH #3 “I CAN GIVE AWAY $10K PER YEAR TO ANYONE AND IT’S OK” • Annual exclusion gifts--now $14/year-- are NOT exempted transfers for Medicaid eligibility • Rather, generally will create a period of ineligibility.
  8. 8. HEFFNER & ASSOCIATES ELDER LAW MYTH #4 “THE STATE WILL MAKE ME SELL MY HOUSE TO QUALIFY FOR MEDICAID” • You can own a principal residence (with equity of less than $525K) and still qualify for Medicaid, provided you declare an intention to return home. • No recovery until after death, and then only against recipient’s probate estate. • However, though permitted to retain principal residence, no income may be retained (other than portion of rental income) to pay house expenses.
  9. 9. HEFFNER & ASSOCIATES ELDER LAW MYTH #5 “MY KID’S NAME IS ON ALL OF MY ACCOUNTS, SO 1/2 IS SAFE” • Except in the case where the money truly belongs to the child or other co-owner, 100% of the bank account will be exposed for spend-down. • There are some exceptions for brokerage accounts, stock and real estate provided the penalty period has passed for adding the name.
  10. 10. HEFFNER & ASSOCIATES ELDER LAW MYTH #6 “THE STATE WON’T MAKE ME SELL MY BEACH HOUSE/REDEEM MY CD/ANNUITY …TO QUALIFY” • Except for a limited number of “exempt” resources (e.g., principal residence (equity less than $525K), irrevocable burial contract), all other assets are deemed “available” for spenddown regardless of whether there is a penalty to redeem the asset or the asset cannot be immediately liquidated. • AT BEST, may be given time to liquidate non-cash or cash-equivalent resources.
  11. 11. HEFFNER & ASSOCIATES ELDER LAW MYTH #7 “AS A SPOUSE, I GET TO KEEP ANYTHING IN MY NAME ALONE” • The spousal allowance is calculated by totaling all of the available marital assets (regardless of which spouse’s name is on the asset) and dividing by two. • The Community Spouse is allowed to keep one-half of the total joint resources up to a maximum of $115,920.
  12. 12. HEFFNER & ASSOCIATES ELDER LAW MYTH #8 “MY ANNUITY IS PROTECTED FROM NURSING HOME COSTS” • An annuity must be specifically designed in order to be Medicaid qualifying. • Elements: irrevocable cannot be surrendered, transferred, collaterally assigned, or returned for a return of the premium paid, name State as beneficiary.
  13. 13. HEFFNER & ASSOCIATES ELDER LAW MYTH #8 “MY ANNUITY IS PROTECTED FROM NURSING HOME COSTS” • Very unlikely that annuity purchased prior to individual’s nursing home placement will pass muster.
  14. 14. HEFFNER & ASSOCIATES ELDER LAW MYTH #9 “IF I QUITCLAIM MY HOUSE TO MY KIDS, IT’S PROTECTED” • Unless SPECIFCALLY exempted, the transfer of ANY asset is subject to a 5 year look-back period. • In addition, outright transfer of interest in home produces negative tax consequences, exposure of home to claims of kids’ creditors, loss of control by parent in most important asset.
  15. 15. HEFFNER & ASSOCIATES ELDER LAW *Copyright 2013, Mark B. Heffner, Esq. Heffner &Associates 615 Jefferson Blvd Warwick, RI 02886 401-737-1600 mheffner@hefflaw.com www.hefflaw.com

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