In many instances, becoming Medicaid compliant is based on a recent crisis that adult children have experienced caring for their own parent's age-related issues—such as dementia, Parkinson's disease, or Alzheimer's. Many of these Baby Boomers don't want their own children to suffer the emotional turmoil and financial commitments they've had to handle. However, despite their parents experience with long term care, they should not be prepare to part with their own income and assets as most still have healthy, active years ahead of them. Instead of rushing into any decisions unnecessarily, here are some scenarios to think about with Medicaid planning:
- Younger than Age 70 and Healthy. Don't commit yourself to transferring assets for at least another decade. You can place your real estate and certain businesses in Medicaid-compliant trusts and use non-retirement assets for discretionary expenses.
- Younger than Age 70 and Not Healthy. There's some time to plan, but due to five-year "look back" constraints for asset transfers, a comprehensive understanding of Medicaid is critical.
- High Income, But Low Assets. Large amounts of either assets or income can make a person ineligible for Medicaid. But while assets can be transferred to another family member, income is harder to transfer, and the amount of retirement income we receive is not easy to control. Younger pensioners with large monthly incomes should talk to a qualified Medicaid attorney about ways to convert large incomes to assets that can be transferred to other individuals.
- Disabled Minor Children. Medicaid planning for a disabled minor child should start prior to the child attaining the age of 18. Courts grant guardianships more easily over people who have never had mental competency than those who have had it and lost it, and will look at the future guardian's ability to apply for Medicaid. Benefits may be easier to obtain in these situations.
- No Spouse and No Children. You may think about not pursuing Medicaid planning unless you feel you need to preserve your extended family's wealth. Medicaid may pay additional health care costs that Medicare doesn't, but the personal care Medicaid provides may be less than what out-of-pocket care providers can offer. These people should use their assets for their own benefit wisely and save Medicaid for when those assets are depleted.
Learning about Medicaid can be done any time, but once steps have been taken to apply for Medicaid, you might not be able to undo your efforts. Don't be in a hurry to give up your financial freedom.
Reference: Kiplinger (April 15, 2016) "What You Need to Know About Applying for Medicaid"