For many people, Medicaid planning should be a crucial estate planning component given the likelihood of the need to rely on Medicaid as a senior. Medicaid planning, however, is surrounded by misconceptions that can lead to costly mistakes. Understanding the truth behind these myths can help you navigate the complexities of Medicaid planning more effectively. Toward that end, a Murfreesboro Medicaid planning attorney at Bennett | Michael | Hornsby debunks a few of the top Medicaid planning myths in Tennessee:
Why Is Medicaid Planning Important?
Medicaid is a joint federal and state program that helps cover medical costs for individuals and families who have limited income and
resources. Medicaid planning is important because when you reach retirement age you will stand about a 70 percent chance of needing long-term care services at some point before you pass away. As a retiree, you will likely rely on Medicare to cover most healthcare expenses; however, Medicare does not cover costs associated with long-term care services. In 2023, the national average for long-term care costs exceeded $100,000 for nursing home care and over $80,000 for assisted living. Tennessee residents paid, on average, about $110,000 and $60,000 for the same services. Given that private health insurance policies also typically exclude coverage for LTC, it should be no surprise that over half of all seniors end up turning to Medicaid for help. The Medicaid eligibility guidelines, however, can be problematic, making it crucial to incorporate Medicaid planning into your estate plan well ahead of time to ensure eligibility and to protect your assets.
Medicaid Planning Myths
Myth 1: You Must Be Impoverished to Qualify for Medicaid
One of the most pervasive myths is that you must have little to no assets to qualify for Medicaid. While Medicaid does have strict asset and income limits, you can qualify if you have some income and resources. In Tennessee, a single applicant can qualify for nursing home Medicaid with up to $2,829 a month in income and $2,000 in countable resources. Moreover, some assets are exempt, including your home up to an equity limit of $713,000 (as of 2024). Medicaid planning can help you preserve other non-exempt assets while still ensuring that you qualify for Medicaid.
Myth 2: Medicaid Will Take Your Home
Many people fear that Medicaid will automatically take their home if they apply for benefits. The truth is that your primary residence is an exempt asset in Tennessee (up to $713,000) when determining Medicaid eligibility. If you have excess equity, Medicaid planning may be able to help you protect that equity.
While your home is likely safe when qualifying for Medicaid, the Medicaid Estate Recovery Program (MERP) may place a lien on your home after your death to recover the costs of care provided. Proper Medicaid planning, such as transferring your home to a trust or using a life estate deed, can help protect your home from estate recovery, ensuring that your loved ones are not left without this valuable asset.
Myth 3: Giving Away Assets Is the Best Way to Qualify for Medicaid
Many people believe that the best way to qualify for Medicaid is simply to give away assets to family members. While this did works decades ago, Medicaid now employs a five-year look-back rule that penalizes an applicant for recent asset transfers. If you transfer assets for less than fair market value within five years of applying for Medicaid, you may incur a penalty period during which you will not be eligible for benefits. Fortunately, there are Medicaid planning tools and strategies that can help you qualify for Medicaid without triggering a penalty period.
Myth 4: It Is Too Late to Start Medicaid Planning
Another common misconception is that Medicaid planning must be done years in advance, and if you or a loved one are already in need of long-term care, it is too late to start planning. While most Medicaid planning strategies work best when implemented early, there may still be effective options available if you are facing an immediate need for care. Strategies like spending down assets on exempt resources, creating a Medicaid-compliant annuity, or utilizing a caregiver agreement are last-minute Medicaid planning strategies that may be able to help you even if you failed to incorporate Medicaid planning into your estate plan years ago.
Contact a Murfreesboro Medicaid Planning Attorney
If you have additional questions about incorporating Medicaid planning into your Tennessee estate plan, consult with an experienced Murfreesboro Medicaid planning attorney at Bennett | Michael | Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your free appointment.
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