Law Office of Harvey L. Cox provides asset protection services from our offices in Waco and Round Rock, Texas.

Law Office of Harvey L. Cox provides asset protection services.

When Should I Begin Long-Term Care Planning? Should I Do It When I Set Up My Initial Estate Planning Documents?

| Feb 21, 2023 | Long-Term Care Planning

In this article, you will discover:

  • When long-term care planning should begin
  • What Medicaid benefits pay for
  • How long Medicaid approval takes
  • Reasons for Medicaid benefits denial

It is best to begin planning for long-term care as soon as possible. I have recently read that approximately 70% of people currently turning 65 will require long-term care in their lifetime, and they will receive that care for an average of three years.

As part of my analysis of an estate, I always include a discussion of long-term care planning. There are more ways to prepare for long-term care today than in the past. The options, however, depend on the age of the person and the number of assets they have. I do find that I can often help people repurpose at least some of their assets to set up a good long-term care plan. But, again, it depends on age and the estate’s value.

How Much In Countable Assets Can Someone Have In Order To Qualify For Long-Term Care Medicaid?

In Texas, a person is limited to $2000 in assets. If someone has more than $2000 in assets, it is crucial to start planning as soon as possible.

When seeking to apply for long-term care Medicaid, the concern is understanding the difference between countable and non-countable assets. Countable assets are things like cash, stocks, bonds, investments, credit unions, savings, checking accounts, and real estate in which one does not reside.

There are also many assets that Medicaid considers exempt (non-countable). Exemptions include personal belongings, household furnishings, automobiles, irrevocable burial trusts, and the primary home. For the home exemption, the Medicaid applicant must live in the home or intend to return the home. For 2022, the home equity interest must be no greater than $636,000. Equity interest calculated as the difference between the value of the home and any outstanding mortgage on the home. If the Medicaid applicant’s spouse is living in the home, the home is exempt regardless of where the applicant lives or their home equity interest.

While one’s home is usually exempt from Medicaid’s asset limit, it is not exempt from the Texas Medicaid Estate Recovery Program (MERP). After a long-term care Medicaid beneficiary’s death, the Medicaid agency in Texas will attempt to get a reimbursement of care costs through whatever estate of the deceased remains. This is often the home. But, the MERP program only pursues the reimbursement when the deceased’s estate is filed for probate. Therefore, you must avoid the probate court system to avoid the MERP program. There are several ways to accomplish the avoidance of probate. The most effective, in my opinion, is by using a trust.

The importance of proper planning cannot be stressed enough. The home will be used to reimburse Medicaid for providing care rather than going to the family as inheritance unless plans are made in advance to avoid MERP.

Can I Use Medicaid Benefits To Pay For Assisted Living Or Must It Be Exclusively For Nursing Home Care Only?

There are a lot of different Medicaid programs. Typically, Medicaid benefits are only for long-term care, i.e., nursing home care.

How Long Does It Take To Get Approved For Medicaid?

The time it takes to get approval for Medicaid varies depending on the applicant’s assets. If the applicant has $2000 or less in assets and their only income is from Social Security, they will likely qualify quickly.

If, however, a person has more assets, Medicaid will look at those assets and the history of transferring those assets with a “fine-tooth comb.” Texas has a 5-year Medicaid Look-Back Period that immediately precedes a Medicaid application date. During this Look-Back Period, the state reviews all asset transfers. If the applicant has gifted assets or sold them for less than fair market value, a period of Medicaid ineligibility will be applied. The assumption is that assets were transferred to meet Medicaid’s asset limit. Some people mistakenly think that the IRS gift tax exemption extends to Medicaid and unknowingly violates the look-back period.

What Are Reasons Medicaid Would Be Denied?

The primary reason for the denial of Medicaid, in my experience, is that the applicant has too many assets or they didn’t do proper planning, so they have to deal with the 5-year Look-Back period penalty.

Again, this accentuates the need for early planning and proper planning. You can no longer take the approach, “Well, I’ll just give everything to my kids and let the government pay for my long-term care.” It doesn’t work that way, and I have dealt with families who have suffered financially because they have mistakenly taken that approach.

For more information on Long-Term Care Planning In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling 254-233-7300 today.