Financial assets have to be spent-down to a certain level in order to become eligible for Medicaid benefits to pay for skilled nursing. But with no funds left to pay the monthly care expenses the approval of the Medicaid application is very critical. Pre-planning with an elder law attorney can avoid these most common reasons that I see Medicaid applications being denied.
Reason #1 – The House is in the Trust. It can be advisable for estate planning goals to put a home in a trust. However, a Medicaid applicant will be denied benefits if his or her home has been transferred to a revocable trust. This is something that can easily be detected by looking at the latest deed for the property. Taking the home out of the trust and using a ladybird deed for probate avoidance should be considered.
Reason #2 – Someone Was Paid to Help. If the Medicaid applicant paid a child or another kind person to help provide for their needs a divestment penalty will likely be assessed. It is so wonderful that family and friends pitch in to help someone with grocery shopping, cleaning their home, sorting and taking medication, traveling to doctor’s appointments, and personal care. But Medicaid policy requires that in order to pay individuals for these types of tasks there has to be a letter from the Medicaid applicant’s doctor supporting the need for assistance. In addition, a caregiver agreement outlining specific terms is required if a Medicaid applicant wants to avoid a penalty for paying someone to help them.
Reason #3 – Helping a Family Member. A Medicaid applicant has to disclose in an application if they have given away any assets within 5 years of applying for benefits. Many times the family member assisting with the application doesn’t consider these things as problems – but they can result in having to pay for care expenses out-of-pocket before Medicaid benefits will start.
• Giving a car away to a child or grandchild when the applicant stops driving.
• Adding a child on to a deed for a home for probate avoidance.
• Helping a grandchild pay some college expenses.
• Giving a child a cash or check as a gift.
• Using a line of credit account to generate money to help out a child or grandchild with their expenses.
• Selling a home to someone for less than fair market value or deeding it to a child less than five years ago.
• Loaning money to someone and not having a loan that meets the Medicaid requirements.
It is not uncommon for these things to occur but it is crucial to seek advice on how Medicaid benefits will be impacted. Filing an application and being denied results in stress, loss of time, and an accumulation of bills from a nursing facility that the person may not be able to pay.