Medicaid application trial and error creates big problems for nursing home residents. Unfortunately, it is a common practice that creates financial nightmares for nursing home residents’ families. This article explains common Medicaid application problems and suggests when people should seek professional help from experienced elder law attorneys.
Medicaid Application Trial and Error – Repetition Doesn’t Fit Square Pegs into Round Holes
Trial and error Medicaid application strategy shows a lack of Medicaid training and understanding. Medicaid eligibility requirements are extremely detailed and inflexible, so “close enough” does not work for most cases. When people repeatedly apply without all of the documents and information that Medicaid requires, they delayed Medicaid eligibility. Meanwhile, nursing home resident’s unpaid nursing home may be mushrooming by as much as $7,000 per month (more than $80,000 per year).
Medicaid Application Trial and Error – Big Problems for Property Owners
Nursing home residents’ real estate problem
They say “a man’s home is his castle,” but property ownership is a problem for nursing home residents. Medicaid counts nursing home residents’ real estate toward their $2,000 resource limits. The state will always deny a trial and error Medicaid application if the applicant’s resource value exceeds $2,000.
Real estate sale authority problem for incapacitated property owners
The U.S. Constitution protects every person from sale of property without the person’s consent. Some people have rude awakenings when they discover this constitutional protection for their family members’ properties.
Power of attorney with unrestricted gift powers
Savvy people use authorize spouses or trustworthy family members to manage assets in advance. A property owner’s power of attorney (POA) with unrestricted gift powers can give someone that authority. Then, if a property owner becomes incapacitated, the power of attorney authorizes a necessary property sale or transfer.
POA versus guardianship
The property ownership problem for a nursing home resident worsens without a proper POA. The sale or transfer of an incapacitated person’s property without a proper POA requires a court order. This is true even for an incapacitated person’s spouse with a POA if the POA lacks unlimited gift powers. A court-appointed guardian must report all of the incapacitated person’s assets to the court and account for income and expenses. The guardian must also seek the court’s permission to sell or transfer the incapacitated person’s assets. Thus, the guardianship process is slow, intrusive, and expensive.
Married couples’ properties
Medicaid generally disqualifies applicants for transferring property for less than market value. However, an applicant can transfer property to the applicant’s spouse without penalty. Therefore, remarried couples should exchange POAs with unlimited gift powers to prepare for this situation. Unprepared couples that lack adequate POAs face expensive Medicaid eligibility delays when incapacitated spouses need nursing home care.
Trial and error Medicaid applications for property-owning applicants: exercises in expensive futility
Repeated applications merely trigger repeated denials unless someone solves the property ownership problem correctly. Real estate sale or transfer is usually the only eligibility solution. An unmarried Medicaid applicant must usually sell real estate, but a married applicant can transfer it to the spouse. If someone lacks understanding of this problem and its solutions, reapplying after Medicaid denial is futile and expensive. With average Indiana nursing home care costing $6,682 per month, the unpaid nursing home bill will just keep growing.
Medicaid Application Trial and Error – Poor Application Timing Produces Bad Results for Married Couples
Asset protection planning for married couples
This article previously indicated that A nursing home resident’s spouse can keep real estate. A Hoosier spouse can also keep a vehicle, the spouse’s IRA, and up to $126,420 worth of other assets in 2019. (Illinois has capped the community spouse resource allowance at $109,560). Spouses can keep more than $126,420 if they plan wisely, but Medicaid application timing is critical.
Asset protection planning takes time and requires complete records and information about a couple’s assets and income
An elder law attorney needs complete information and records about a assets and income to make an asset protection plan. Asset transfers often require time-consuming coordination with financial institutions and life insurance companies. It often takes two or three weeks for financial institutions and life insurance companies to provide asset value verifications. Some unresponsive life insurance companies consume tremendous time and require multiple asset value verification requests.
Premature Medicaid application causes expensive delays
Trial and error Medicaid application complicates and slows the asset protection planning process. The state will deny a premature Medicaid application because the applicant will have excess resources. Furthermore, the state will require proof of asset values for the first application date and the reapplication date. Considering the lead time for value verifications, the extra verification requirements create frustrating delays in the planning process. Meanwhile, average Indiana nursing home costs rise by $6,682 per month during Medicaid eligibility delays.
Medicaid Application Trial and Error – Generous Givers Require Careful Planning and Application Timing
Medicaid penalizes generous applicants
Generosity may be a virtue, but trial and error strategy hurts people who have given gifts in the past. Medicaid penalizes gift-givers by disqualifying them from Medicaid benefits. Gifts can be the ordinary variety, but they can also be sales for less than fair market value.
A brief Medicaid transfer penalty explanation
unless they gave their gifts more than 5 years earlier. So, a gift within five years preceding a Medicaid application creates an important timing issue. Tragically, we have seen several Medicaid applications in the last month or two of the 5-year Medicaid look-back period. Those applicants might have qualified in later applications, but poor timing cost them tens of thousands of dollars of Medicaid benefits.
Medicaid Application Trial and Error – When to Seek Elder Law Counsel
You should seek counsel from an experienced elder law firm if…
There are many reasons to hire an experienced elder law attorney to help plan for nursing home eligibility. Consider the following guidelines for when someone should seek an elder law firm’s help immediately for a nursing home resident.
- The nursing home resident is married.
- Either the nursing home resident or the resident’s spouse owns a home or other property.
- The nursing home resident or the resident’s spouse has ever made a trust.
- Either the nursing home resident or the resident’s spouse lacks a power of attorney that specifically authorizes unlimited gifts.
- The nursing home resident or the resident’s spouse owns multiple vehicles. Vehicles include motorhomes, RV campers, equipment trailers, boats, motorcycles, ATVs, airplanes (some people own these), cars, or trucks.
- Either the nursing home resident or the resident’s spouse has made a bargain sale in the past 5 years. Note that a $10 sale of a $100 item is a $90 gift.
- The nursing home resident or the resident’s spouse has given away money or other gifts in the past 5 years. Note that there is no minimum or maximum value in this rule of thumb.
- Either the nursing home resident or the resident’s spouse has an IRA.
- The nursing home resident or the resident’s spouse has investments, life insurance policies, or annuities.
- Either the nursing home resident or the resident’s spouse owns a business.
- The nursing home resident or the resident’s spouse lives with a disabled adult child.
- A son or daughter lived with the nursing home resident in the resident’s home for the past two years.
Trial and error is rolling the dice – experienced elder law firms prefer certainty
If any of the listed situations exist, people should consult with experienced elder law counsel promptly. The planning opportunity window may be small, so delay is a costly dice roll. A reputable elder law firm strives for Medicaid qualification on the first application, instead of gambling with trial and error.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys.
Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and the Indiana Association of Mediators. He served as the 2014-15 President of the Indiana State Bar Association, and he is a registered civil mediator.
Find more information about these and other topics on YouTube and at www.HawkinsElderLaw.com. Facebook users can like @HawkinsElderLaw on Facebook. Twitter users can follow @HawkinsElderLaw. The LinkedIn crowd can follow us at https://www.linkedin.com/company/hawkinselderlaw. You can also call us at 812-268-8777.
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