Medicaid will pay the long-term care needs for individuals who meet certain income and asset criteria. This means that Medicaid will pay the high cost of home care or nursing home care for seniors. Since Medicaid is a means tested program, many people believe that they cannot access benefits. This common misconception results in people failing to plan ahead and spending down most of their assets before realizing their mistake. Yet, even with little planning, families can preserve funds by moving assets out of the Medicaid applicant’s name. While everyone’s situation is different, the one irreplaceable document every senior needs is a durable power of attorney.
Asset Transfer, Eligibility, and Applying for Medicaid
A durable power of attorney allows an agent to step into the applicant’s shoes as a fiduciary. A comprehensive power of attorney allows the agent to transfer assets, gain eligibility and apply for Medicaid. This is crucial if the applicant has become incapacitated – or cannot easily meet with an attorney. Without giving an agent the authority to do this planning, optimal asset protection may not be possible.
Community Medicaid covers home care needs in the home. There is currently no lookback period for Community Medicaid. This means an applicant can transfer assets one month and apply for Medicaid benefits the following month. In contrast, Chronic Medicaid–which covers nursing home care–there is a 5 year lookback. Thus, an applicant is penalized for transfers made for less than fair market value or “gifted” within the 5 years immediately before institutionalization. But, there are certain exempt transfers that can be made within the 5 year lookback period which make an applicant immediately eligible for Chronic Medicaid. Exempt transfers include transferring an unlimited amount of money to a spouse or disabled child. To effectuate these transfers, the Medicaid applicant must either complete the paperwork or have a valid power of attorney allowing another to do so. Often, the Medicaid applicant does not have capacity to transfer the assets or complete the application. The agent under a power of attorney can do this emergency planning and preserve assets in even in eleventh hour. The only alternative when there is no power of attorney and the applicant has no capacity, is applying to the court for guardianship.
Establish Pooled Income Trusts
When protecting income in the Community Medicaid setting, a pooled income trust is typically required. An applicant for Community Medicaid has an income limit of $904.00 per month, plus the cost of health insurance premiums. Individuals with income that exceeds this level must contribute the excess income to their cost of long term care each month. This can be avoided with the establishment of a pooled income trust. If the Medicaid applicant does not have capacity, an agent through a power of attorney will need to establish a pooled income trust on their behalf. The power of attorney must specifically grant the agent the authority to establish trusts. Without such a power, the excess income cannot be preserved.
Access Financial Documents and Sign Medicaid Applications
Finally, the actual Medicaid application and corresponding paperwork needs the Medicaid applicant’s signature. If the applicant is unable to sign the paperwork, an agent under a power of attorney may sign the paperwork on their behalf. Additionally, numerous financial documents must be submitted (i.e. proof of income, tax returns, bank statements). Gathering this information from specific institutions requires a power of attorney granting such authority.
A valid and comprehensive power of attorney is an integral part of any estate plan, especially when dealing with Medicaid eligibility. The power of attorney is used in every step of the process and proves to be invaluable in preserving assets and income.