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Be Clear On The Downside

Most of us hope for the best, but fail to plan for the worst.  Yet advance planning can give you tremendous peace of mind. It’s not enjoyable to think about the prospect of suffering from a chronic medical condition or a prolonged decline.  So instead of preparing for potential problems in the future, most people delay or take no action at all.

Unfortunately, this “wait and see” approach can lead to disastrous consequences.  If you don’t create a good plan, and then require long-term care, Medicaid will insist you use up virtually all your “resources” (savings and property) before it pays any benefits.  This is referred to as the “spend down.”

If you own your home, Medicaid won’t kick you out of it, and won’t count it toward the value of your assets when determining your eligibility – but only so long as it is your primary residence.  Be aware that Medicaid is keeping track of how much it is spending on your care. Once you move out of the home or pass on, Medicaid may be entitled to enforce a lien against it equal to the cost of the benefits it provided to you.

The end result of the “wait and see” approach is often that you will exhaust your own resources and find yourself in poverty before you are eligible for any Medicaid benefits.  But it doesn’t have to be that way.

Here’s an example of what can be accomplished, in a case Lamson & Cutner handled for an elderly couple with a significant net worth.  The husband, who was close to 90 years old, needed nursing home care.  We advised him to transfer his money and property to his wife (the “well spouse”).  We then filed a Medicaid application for nursing home benefits.  These simple planning steps allowed our client to qualify, and he was approved.

The outcome is that his nursing home care is now fully paid for by Medicaid, his wife’s financial needs are satisfied, and the cash and holdings they invested a lifetime of effort in building could, with additional planning, be secured.  We then did estate planning for his wife and took steps to help protect the assets in her possession.

Regardless of what the future may bring for the wife’s own medical and health needs, she is in the strongest possible financial position.  (In most cases involving married couples, further planning should be done to protect the assets in the hands of the well spouse to the extent possible, as he or she may subsequently be subject to a reimbursement claim by Medicaid.)

This couple won’t lose everything they worked for through ruinous health care expenses, and perhaps most importantly, they won’t leave the well spouse in a precarious financial position should she need long-term care down the road. The well spouse also has the financial resources to make her husband’s stay at the nursing home as pleasant as possible.

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