Why is Medicaid Planning Important?
The main goal of Medicaid planning is to legally shift as much burden on the government for the cost of long term care as the law allows. .
Most large financial firms explain money planning by comparing personal finance to a three legged stool. Each of the three legs represents the following traditional components of financial planning.
I believe personal finances should be thought of as a four legged chair rather than a three legged stool. Many Americans are finding out about this very important fourth leg at the last minute. So, why is nobody talking about the fourth leg early on? Do other financial, retirement and estate planning people know about the fourth leg and how to incorporate it into the discussion, or are some just simply pretending it doesn’t exist?
What is the fourth leg that balances personal finances?
We believe it is Medicaid Planning!
Who Qualifies For Medicaid?
Medicaid and Medicare are often confused with each other. Click here to learn the difference between Medicaid and Medicare.
No one knows when or how they will die. So, unless you die quickly, there is a very good chance that you will break down before death. At some point we require others to take care of us. The role of caregiver is typically fulfilled by family, friends, and paid care at home or in a care facility.
According to a 2010 AARP report, the average yearly nursing home bill runs in excess of $70,000.
How does at-home and facility care get paid for?
Unless you’re independently wealthy and can afford this cost out of pocket, you may need a plan. Perhaps you’ll purchase or have already purchased a long-term care policy. A long-term care policy is a good way to protect some of your money. But, don’t forget about those premiums you’ll have to pay. Even if you have a long-term care policy, will it be enough to cover the cost? You may still have to dig into your money reserves to cover some cost. You may want to give this all little more thought before the situation arises.
What is Medicaid Planning?
Whether you are researching Medicaid answers for yourself or a loved one, Medicaid Planning is something that you should know about. Medicaid is something that can affect finances in a real hurry.
Basically there are two types of Medicaid Planning:
- Pinch Planning
- Precaution Planning
What is Medicaid Pinch Planning?
Medicaid Pinch Planning is when a patient is in need of care and is really in a “pinch”. In a pinch type of medical situation, the patient needs either nursing home or at-home care. Immediate and important decisions have to be made and action must be taken! Two important issues need attention at the same time – healthcare and money. A stick of dynamite has now been lit. Now what?
You will be faced with healthcare and money decisions with very little time to make them. Meanwhile, all of the patient’s money is getting assembled to be looked at under the Medicaid microscope (if an application for Medicaid is looming). Emotions are running high. Nerves are frazzled. Who’s thought about the nursing home selection? At this point – timing is crucial.
Is this the time that you would like to find the advisor that correctly advises you? Yeah probably – But who do you turn to? Do you call your investment planning person? Your attorney? Your accountant? A social worker? Your banker?
All of these folks may give you advice. Some of the advice you get may be good and some may be not so good. These folks may have limited knowledge and training in Medicaid Planning. So you very likely will end up with mixed results, opinions and choices. You need some financial direction concerning the money that you have worked a lifetime to accumulate. Do you really want to spend it all before Medicaid comes to the rescue? This is where a Medicaid Planner comes in.
A financial planner, estate planner, retirement planner, estate planning attorney and C.P.A. may all give good advice about a person improving their financial situation before or during retirement. These professionals can help you in setting up the proper powers of attorney and/or trusts that can assist in avoiding ugly living and/or dying probate situations.
However, a Medicaid Planner specializes in advising on Medicaid situations. Medicaid Planning is quite different. Sound money planning advice is not always the same as practical Medicaid Planning advice. As a matter of fact, some planning techniques could cause an artificial increase in a patient’s countable money. This could work against a patient looking for assistance from Medicaid. This is why I think the fourth leg of the financial chair, Medicaid Planning, could possibly be considered the foundation leg.
The advice you receive and that is acted upon can all determine how much money the patient can keep or will be required to spend down according to Medicaid Spend down rules.
Pinch Planning will not solve all of the patient’s problems. It will probably not provide complete asset protection. Nor will the patient be able to have as many planning options available as the Precaution Planning process could potentially deliver. However, Pinch Planning can still provide some types of relief which is better than nothing.
What is Medicaid Precaution Planning?
Medicaid Precaution Planning is a process of going over a person’s money situation to provide some estate planning ideas. The goal of Medicaid Precaution Planning is to help create a financial structure that may help provide more choices at much less expense should a Medicaid situation present itself.
Medicaid Planning includes going over a person’s financial, retirement, and estate planning to help provide options. Many advisors seem to ignore or pretend the four legged chair doesn’t exist. But why not have an open discussion about the “elephant in the room”, the cost of long-term care and how it gets paid?
Still wondering why is it important to plan for Medicaid?
Because the spend down of your money in order to qualify for Medicaid could possibly cost you a lifetime of savings and your family’s inheritance.
Could there possibly be a better way?
Sure, why spend down when you can asset protect? After all, it’s your money!