Is Medicaid Planning Legal?

Feb 7, 2023

Nursing homes are much more expensive than most people realize. Applying for Medicaid can help cover much of those costs, but in order to make sure that you are able to qualify, you need to plan ahead of time and shield much of your savings so they don’t count against you.  On the surface, it sounds like this is a shady way to get around Medicaid laws, or is dishonest. Because of the nature of this process, many people wonder if Medicaid planning is legal. We answer all your questions about what the laws say regarding Medicaid planning below so you can have peace of mind about the steps you should take to prepare for your golden years! 

What Is Medicaid/Medicaid Planning?

While everyone wants to live a long life, living longer often means that you will require nursing home care at some point in your lifetime. Unfortunately, long-term care costs are typically not covered by most insurance companies or by Medicare, and they can be pricey; on average, it costs between $80,000 – $100,000 annually for a private room inside a nursing home anywhere in the U.S., which doesn’t include the costs of medications and other health interventions that may be necessary. 

Medicaid is government financial aid, a form of health coverage available to Americans including low-income adults, children, pregnant women, elderly adults or people with disabilities. It is administered individually by each state, according to federal requirements and is jointly funded by the state and the government. Currently there are 84.3 million people that are covered by it. While Medicaid can absolutely be used to cover the costs of a nursing home, you have to fall under a certain income or asset range in order to qualify. 

A single adult entering nursing home care must have assets totaling no more than $2,000 and income below $2,742 a month (in most states, and also in Texas). Any income from employee wages to alimony to social security and pension payments is considered countable income by the government when it comes to Medicaid eligibility. If an elderly person receives money from their retirement or pension, that can be enough to disqualify them from Medicaid, but it isn’t usually enough to cover their needed nursing home care. Assets are classified as anything in a bank account, bonds, investments, cash, and even what is left of a stimulus check from the COVID-19 pandemic. Exempt assets, however, include irrevocable trusts, automobiles, IRAs/401ks in “payout status,” and personal belongings. 

This leaves many seniors, particularly those who are in the middle class, in a difficult position of having too much money to qualify, but not enough money to afford nursing home care. Enter Medicaid planning – which is a term for converting assets you own that Medicaid “counts” towards your eligibility into “noncountable” assets, or moving them outside your name using various tools like trusts and annuities. This way, you will still be able to access them, but they won’t prevent you from getting financial aid. 

Thus, you can protect your assets from being completely absorbed by these costs that long-term care can accrue. A Medicaid planning attorney can help you plan for how you’ll pay for long-term care by helping you qualify for Medicaid, so that you can afford the care that you need!

Is It Legal To Get Medicaid Planning? 

Medicaid planning might sound suspect if you’ve never heard of it before, but yes!  This process is absolutely legal and in most elderly adults’ best interests. 

It may involve some of the following steps:

  • Drafting personal service contracts, which are complex documents that help you qualify for Medicaid by reducing your reportable assets
  • Preparing and executing a Qualified Income Trust, which is a type of irrevocable trust that involves your income and shields it from Medicaid
  • Spending down or restructuring assets ahead of the 5 year “look back” period, in which any gifts or transfers made does count towards your eligibility. 
  • And more. 

All of these are legal under both federal and Texas Medicaid laws. 

Why Should I Work With A Medicaid Planning Attorney?

It is important to note that in order for Medicaid planning to be legal, only a licensed attorney can guide you through the Medicaid planning process or offer you advice. The Florida Supreme Court ruled in 2015 that it is against the law for Medicaid planners who are not lawyers to engage in this activity; anyone else besides an attorney is technically practicing law without a license and may be punished with up to 5 years in prison. 

An experienced Medicaid planning attorney can identify your needs, explain your options, and walk you through each step of Medicaid planning. They can ensure you understand the Medicaid laws, inform you on which form of Medicaid you should apply for, gather and complete the necessary paperwork, and complete and submit your Medicaid application after ensuring there are no errors! They can even assist you with appeals if necessary. 

Don’t procrastinate getting your affairs in order; no one is guaranteed tomorrow, and even if you are in great health now, your health could decline down the road or you may sustain an injury that requires long-term care. Prioritize Medicaid planning now and give yourself the time to meet all of the required criteria for the funding you need to avoid losing your life savings, going into debt, or becoming a burden on your family. 

Why Choose The Law Offices Of Michelle E. Murphy?

Attorney Michelle E. Murphy has over 20 years of experience helping elderly clients navigate the Medicaid laws and complicated application process. She knows Medicaid planning can be stressful and overwhelming, but she knows what she is doing when it comes to transferring assets in an ethical and legal way. Her knowledge can help give you the advantage you need to protect your assets! If you want peace of mind and confidence knowing that your attorney is looking out for your best interest, call the Law Offices of Michelle E. Murphy today for a free consultation where you can better get to know her either in person or virtually, whichever is most convenient for you! Don’t wait to prepare for the future, call now.