Kansas Medicaid is a very helpful health care assistance program. The program is run on the state level pursuant to federal requirements. It is a need-based benefits program that covers medical care that is deemed medically necessary by a physician. For that reason, there are income and financial resource limitations imposed on applicants. So, if your assets exceed $2,000 then you may not be eligible for Medicaid benefits. That is where Medicaid planning comes in. As part of your Medicaid planning, our Overland Park Medicaid lawyers recommend using a Medicaid trust, but there are a few things to consider. Here is what you need to know.
Why you can’t simply give away your property to be eligible
Many clients have the false impression that they need to give away their property to their family members, so they can reduce their assets and become eligible for Medicaid benefits. When it comes to Overland Park Medicaid planning, that does not work. In fact, there was a law passed in 2005 establishing a period of ineligibility (a penalty period) that applies if you need long-term care benefits, but you transfer any of your property within five years of your application. But, if you have a proper Medicaid plan, you can protect your assets.
How the penalty period works
If a potential Medicaid applicant gives $10,000 of his estate to a family member four years and six months before submitting the application, the period of ineligibility begins when the application is submitted, not when the gift was made. The period of ineligibility is referred to as the “penalty period” or the “five-year lookback period.” The length of the penalty period will depend on the value of the assets that were transferred. With careful planning and assistance from our Overland Park Medicaid lawyers, you can still retain control of your property while maintaining your eligibility for Medicaid benefits.
The penalty period doesn’t apply in every situation
The five-year penalty period does not apply in every situation. Whether you have to wait to receive benefits depends on your specific situation. The Medicaid penalty period is only applicable for long-term care expenses in an institutional setting, or for those receiving long-term home health care. On the other hand, acute care including hospital or physician services is not affected by the five-year look-back period.
Some common strategies for Medicaid planning
One useful strategy is to use your countable assets, those that Medicaid includes in determining your financial resources, to pay off debts and purchase other non-countable assets. That could include prepaying funeral expenses and real estate taxes. You can also purchase a new vehicle and make improvements to your residence.
Consider creating a Medicaid trust
Medicaid trusts are special types of trusts frequently used to provide protection for assets when someone needs long-term care and wants to apply for Medicaid benefits. Using the trust properly will allow you to maintain your eligibility for Medicaid without having to relinquish your home. The trust will name residual beneficiaries who will ultimately receive the trust property at your death. There are some issues to consider before deciding to create one.
What is the primary disadvantage of a Medicaid trust?
The main disadvantage of a Medicaid trust is that once your assets have been transferred into the trust you no longer have any control over them because they are now considered the property of the trust. Although you cannot have any access to the principal of the trust once the trust has been created, you may still receive benefits from the trust through regular dividends. However, you must be careful because any payments you receive are counted as your income for purposes of Medicaid eligibility.
Another disadvantage to consider is the fact that, if there are any assets remaining in the trust at the time of your death, those assets may be used to reimburse the Medicaid program for the costs of the care you received at a long-term care facility.
Creating a Medicaid trust with the help of our Overland Park Medicaid lawyers
The rules regarding Medicaid, its eligibility requirements and its recovery methods can be complicated and apply differently to each individual, depending on the unique nature of that person’s estate. For that reason, it is very important that you consult with one of our attorneys with every aspect of your Medicaid planning. Once you determine whether a Medicaid trust is right for you and should be included in your Medicaid plan, let our attorneys help you draft the proper Medicaid trust in order to protect your assets and your eligibility.
Download our free estate planning worksheet today! If you have questions regarding trusts or any other Medicaid planning matters, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!
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