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Medicaid planning: Even the low to moderate income can benefit

On Behalf of | Jun 9, 2019 | Firm News

Estate planning in Colorado is a useful tool that many families use to protect their assets. It can also help families mitigate their long-term care costs. People are living longer, requiring them to fall back on assets and resources they originally planned to leave to their families. Long-term care is not cheap. Fortunately, resources like Medicaid help many families shoulder the financial burden.  

Medicaid is not just for those who have little to no assets. Many mid- to upper-income families can retain Medicaid eligibility and preserve their assets with  proper estate planning. Here are a few methods to consider.  

Understand the purpose of Medicaid  

Medicaid is a program meant to help  those unable to afford the cost of long-term care in Louisville and Englewood. It requires program participants to rely on their resources before offering financial assistance for certain end-of-life care needs. To prevent mismanagement and abuse, and to preserve benefits for those in need, seniors must meet eligibility requirements before coverage begins. One requirement involves passing the five-year look-back period.  

Medicaid uses an exclusionary period to evaluate the transfer or disposal of assets that occur during the five years that precede eligibility. It is common practice for some moderate-income seniors to try to circumvent this rule by gifting and giving away assets so they can meet the income, asset and property threshold limit, not realizing  the inclusion of assets and inheritances in estate plans.  

Use estate planning to overcome the challenges of Medicaid planning  

Estate planning can help older individuals avoid the penalty period of ineligibility for Medicaid long-term benefits. Transfers that occur outside the five-year look-back period do not affect Medicaid eligibility. Leveraging certain types of  special needs trusts, i.e., income-only, supplement needs, testamentary and family discretionary, can help protect their end-of-life care needs, preserve their legacies and give them more flexibility in passing down their estate without losing  Medicaid eligibility.  

Proper estate planning requires careful consideration of unique circumstances and leveraging the right legal and financial strategies to mitigate potential challenges. Many families find it beneficial to seek out professional estate planning guidance to overcome the difficulties of long-term care planning and estate preservation.