5 Ways Medicaid Planners Fail to Look Ahead

Unfortunately, it is all too common, and it just happened a few weeks ago. I spoke with a long-time client about his father passing on and that his mother was in the nursing home on Medicaid. He had been trying to get answers from the attorney his father had hired, but as I looked through the deed and legal documents, I realized just how "one-step" the planning was. And just how utterly the attorney failed to plan beyond just getting Mom qualified.  

Also unfortunately, this is so common that the attorney really didn't do anything negligent because he met the extremely low bar of just getting Mom qualified. When it comes to Medicaid Planning, the real goal should be planning for the entire family, incorporating multiple contingencies, and having the structure to pivot to different strategies when needed. This attorney did NONE of this.

Here are the five ways Medicaid Planners fail to look ahead, with this attorney failing in all five of them.

1) Not putting in agent contingencies for power of attorney documents. When someone goes into a nursing home, there is still every possibility that other people will pass on first or become unable to provide care and decision-making. That is why it should be standard practice to incorporate at least two alternate agents in both the durable general power of attorney and the health care power of attorney.

With Mom and Dad, the attorney not only failed to do any power of attorney documents for Dad, but he also only named Dad as Mom's agent without any backup agents. Thankfully, Mom is capable to executing a new power of attorney despite having been in a nursing facility for years, but that is not always the case. Had Mom not been competent to sign a power of attorney, then her child would have had to go to court to initiate a guardianship proceeding, and now every move of money in a reworked Medicaid plan would have to be supervised and approved by a court. All because the attorney was too short-sighted to incorporate backup agents.

2) Keeping the house joint with a spouse: The family home is often one of the most valuable assets our clients have and want to preserve, and not just because of the dollar value. It also represents all of the hard work people put into purchasing, repairing, and taking pride in maintaining throughout their life. The thought of having to sell, or even mortgage, this huge asset is repugnant to people. This is why they often breathe a sigh of relief when they learn they don't need to sell the house if Mom or Dad needs nursing home level care. However, if a Medicaid Planner explains just this point but fails to discuss "Medicaid recovery," then I believe they are also failing their clients.

When a married couple own a primary residence, Medicaid will not make them "spend down" the residence to qualify. Even if just one unmarried person needs care and they subjectively "intend" to return home, then Medicaid will not force them to sell the house to pay for care. However, Medicaid will place a lien on the house for every dollar they spent providing care. When there is a SIXTY PERCENT chance that a caregiver spouse will die before the spouse needing care (https://www.cunninghamlegal.com/what-if-the-caregiver-dies-first/), leaving the house jointly owned by both spouses means a majority of the time the family will still lose the house to Medicaid. There are simple techniques to protect the house from being lost, but many attorneys and estate planners look beyond this one-step qualification attitude.

3) Not doing documents for the spouse outside the facility. Just because one spouse needs care, or is even just more likely to need care first, doesn't mean only that spouse needing care has to get their estate and trust documents done. As I mentioned before, there is a sixty percent (60%) chance that the spouse outside the facility will die first, so just ignoring the "other spouse" in coming up with an overall plan just doesn't make sense.

Who takes over Mom's care if both Mom and Dad suddenly need skilled nursing care? What if the caregiver spouse dies and some or all of their assets suddenly end up disqualifying the spouse needing care? Should the family with Mom already in the nursing home be forced to fight out guardianship over Dad in court because the attorney didn't bother to do Dad's legal documents when coming up with Mom's Medicaid Game Plan? Basic Power of Attorney, Will, and Trust documents should incorporate the spouse outside of the nursing home, but many Medicaid Planners simply don't look far enough ahead to accomplish this... and it can be legally and financially disastrous for the family.

4) Leaving the spouse in the facility as the beneficiary of the outside spouse's estate. This was probably one of the biggest issues in the case I mentioned above. Right now, the deceased Dad's Will states that Mom is the primary beneficiary of Dad's estate. When the attorney got Mom qualified for Medicaid, they never bothered to change the "old Wills" that had Mom listing Dad and Dad listing Mom as the primary beneficiary in each other's documents.

By failing to update these estate documents, this means that now the estate has to pay Mom "in fee simple and clear of any trust" all of Dad's probate assets, which is very likely to put Mom's checking account over the $2,000 limit to maintain qualification for Medicaid. Had the attorney thought even one more step ahead and arranged Dad's estate differently, this impending disqualification wouldn't be an issue now.

5) Ignoring the complete document "toolbox" setup for future contingencies. As I am now mentioning a third time, the caregiver spouse is likely to die before the spouse needing care sixty percent (60%) of the time. Part of what we routinely do for our care assistance clients and their families is set up the complete toolbox of documents and trusts for BOTH spouses in a coordinated fashion so that we have as many options on the table as possible should the situation change. This allows for all of life's contingencies to have a much better chance of being addressed if and when the time comes to adjust the plan.

For example, we are typically setting up both an Irrevocable Property Trust and an Irrevocable Family Trust (for the money and investments) to move assets and start the "five year clock" for Medicaid transfers. We do this, including setting up the Property Trust, even if they don't have a house at the time we set things up. Why? Because if there is an opportunity to purchase real estate through the trusts in the future, the money in the Irrevocable Family Trust can be moved to the Irrevocable Property Trust to make the purchase, and then when the parents pass on the family can immediately sell that real estate without capital gains taxes. Those capital gains taxes would still be there if the house were simply purchased into the Irrevocable Family Trust.

Just because it looks like right now you only need a hammer and a saw doesn't mean you shouldn't also keep a screwdriver in the toolbox.

It is unfortunate that the competence bar for Medicaid Planning is so low. However, because the bar is that low, attorneys who only look that one step ahead are nonetheless still meeting the recognized level of competence for this field of practice. If you are going to spend good money to get yourself or a loved one qualified (or eventually qualified) for Medicaid, then you probably want my clients want, which is to plan for as many contingencies as possible to save the family's hard earned money from being lost to the nursing home.

For more information, please check out our free educational materials on the different Medicaid rules and how to get started at http://www.FreeMedicaidCourse.com or call the law office at 919-844-7993 to get started. And remember: "Professionals only looking one step ahead leads their clients' families to walk into oncoming traffic."--Jeffrey G. Marsocci, The Plain English Attorney (R).