Medicaid Planning – Saving a Legacy

Posted By: Ken Russell | September 6th, 2018

Medicaid Planning is, in part, an effort to preserve a financial legacy for children despite the fact that a parent is about to experience the potential devastating financial costs of growing old.

The average cost of a nursing home in Pennsylvania is $109,000 per year.  There are five ways to pay for the cost of a nursing home:

  1. Pay for it yourself – hope you have saved enough (do the math)
  2. Long Term Care Insurance – you may never need the insurance or you may need much more insurance than you secured.  You will never know the correct amount needed.
  3. Medicare – is not designed for, nor will it pay for long term care
  4. Medicaid – the primary government program paying for nursing home costs
  5. VA Benefits – each veteran may have some of these benefits available to assist for their long-term care

You can understand the impact that paying $109,000 will have on a person’s net wealth.  At best, it will significantly drain the estate, at worst, it will bankrupt the estate.

Many clients ask us if there is anything that we can do for them to pay for their own care.  They don’t want to burden their children, they also want to preserve some of their estate to pass on to their children.  Children also approach us with similar concerns for their parents.

Therein lies a quandary – Medicaid is a poverty program and can only subsidize the care of an elderly person if that person is “impoverished.”

“Impoverished”, it is what it sounds like: a person will only be eligible for Medicaid if they have limited assets (for example, the cash amount of $2,400).   There are strict rules on calculation and some assets are “countable assets” (such as cash in a bank account) and some are not (such as a home or a car).

If an individual is married, there are also certain calculations performed on the joint assets of a couple which permit a spouse to retain certain assets to ensure that a spouse will not be themselves impoverished.

When presented with the option of paying for care or having Medicaid (the government) pay for medical and housing costs, many persons want to know their options so that they can preserve their own assets or preserve them for their spouse or children.  As lawyers, our duty to our clients is to zealously represent such clients which means that we talk to them about the many planning opportunities to preserve their individual assets.

There are “pre-planning” opportunities that exist where we build into an estate plan financial options for individuals if the need for a nursing home arises in the future.  Then there is “crisis planning,” where a client comes to us when a spouse or a parent is about to go into the nursing home.  Both of these planning techniques are very different.

Most estate planning documents do not have Medicaid planning in mind, which many times hampers families at a critical time.  For example, an Agent under a generic Power of Attorney may not have the authority to gift assets because such a gift under that POA would be a breach of an Agent’s fiduciary duty.  The fiduciary duty of such an Agent would be to act in the principal’s best interest and, typically, the best interest of an individual is not giving their money away to their children.

Good planning necessitates an understanding of the Medicaid law and documents which provide optionality for a client.  Baratta, Russell & Baratta (BRB) understands Medicaid and we are able to advise you on options and draft optionality into your estate plan.

BRB can also help you if a loved one goes into a nursing home and can help you draft your present estate plan to provide multiple options in case a nursing home is in your future.  Presenting options and protecting your future options are an important part of your estate plan.

We would welcome the opportunity to discuss your estate plan needs with you. Please feel free to call BRB at 215-914-2222 to schedule an appointment.

“Because you brought me into this world…and from that day you owed me everything you could ever do for me like I will owe my son…”

Sidney Poitier – “Guess Who’s Coming to Dinner”

About the Author

Ken Russell is the principal attorney in Baratta, Russell & Baratta Trusts & Estates department. Ken has been providing estate planning and administration legal advice for over 20 years. Ken understands the importance of your legacy and ensuring your loved-ones receive the fruits of your lifetime of effort.

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