Long-term care options are costly and aren’t covered by Medicare. Because of this, some people have to determine how they will pay for the care they need. One option is Medicaid, but this is a needs-based program that comes with strict income and asset limits.
People who have assets or income over the limit are faced with a difficult situation. They stand to lose what they’ve worked hard for so they can move into a long-term care facility because they can’t get the financial assistance of Medicaid. By planning for this scenario well in advance of needing Medicaid, they may be able to increase their chance of qualifying.
Limits on gifting
When a person applies for Medicaid, the applicant’s financial history is reviewed for the 60 months prior to the application. During this period, any assets that were given away or transferred for less than the fair market value, the person will incur a penalty.
The penalty is the difference between the fair market value and amount the individual received for the asset. That’s divided by the penalty divisor, which is the average cost for private nursing home case. In 2024, Florida’s penalty divisor is $10,438. The resulting number is the number of months that Medicaid eligibility is delayed.
Taking control of long-term care planning as early as possible is beneficial. One of the options to do this is using trusts. Certain irrevocable trusts can be used to shelter assets for beneficiaries without the creator facing a penalty.
There are very strict laws surrounding what a person can do to spend down their estate in order to qualify for Medicaid. Discussing their situation with someone familiar with these situations may be beneficial so they can learn their options and determine how to proceed.