Navigating Medicaid Planning

“Whether a variable annuity is a good option, depends on all sorts of related financial considerations, including other sources of income in retirement and your individual situation and goals.”

MoneyCNBC recently reported, in “Here’s a surprise source you can tap for long-term care services,” that Medicaid planning can bring together elder law attorneys in New Jersey, accountants and financial advisors to help seniors pay for nursing home care, while protecting their family members.

Medicaid covers a range of long-term services for eligible applicants. States generally require that individual applicants have no more than $2,000 in assets ($3,000 to $6,000 for couples). State income requirements vary by jurisdiction.

Medicaid planning is a strategy to work with attorneys, accountants, and advisors to shift wealth to trusts or annuities to qualify.

Those who should be thinking about this are seniors who aren’t insurable for some reason. If they have some assets but needed care in a nursing home, their savings would quickly be drained.

To qualify for Medicaid and pass the means test, older individuals must transfer their wealth at least five years before they apply. There’s what is called a “five-year lookback.” An applicant may be subject to penalties and be ineligible for Medicaid for a period of time for any gifts made within the 5 year period. They’d have to pay out of pocket. Remember, a transfer of assets can be risky in Medicaid planning. That’s because an outright gift of assets to a relative, could mean that the recipient doesn’t get a step-up in basis. They could wind up with hefty capital gains taxes, if they try to sell the asset immediately. In addition, leaving money to a child can be reached in a divorce or by creditors. One option may be an irrevocable trust. This is because those assets aren’t under the control of the senior and are protected from creditors.

There are many moving parts in elder care planning, such as taxes, trusts, and asset management. Leverage the expertise of a team of professionals to devise a strategy.

Reference: CNBC (February 27, 2018) “Here’s a surprise source you can tap for long-term care services”