What Is The Medicaid Look Back Period? How Does it Affect My Eligibility?
The Medicaid look back period is a period of years into which the state of Florida has the ability to inquire regarding how you spent your money and how your money was disbursed. The look back period in Florida is five years prior to the date of the Medicaid application. Have you made any uncompensated transfers or gifts that are otherwise not justified under the law? Did you give your money away five years ago with the purpose of getting Medicaid care? A violation of the look back period can delay Medicaid eligibility. Delayed Medicaid eligibility means that you must private pay skilled nursing home costs at the rate of $8,000 to $12,000 per month until the Medicaid penalty period has been completed.
The Medicaid penalty for violating the look back period is a term of months that Medicaid does not cover. The penalty is calculated by taking the amount of invalid transfers and dividing it by the average cost of skilled nursing home care in Florida, which is adjusted each year for inflation. For example, if you give away $91,000, you are looking at approximately a ten month delay in Medicaid coverage.
What Is The Difference Between A Revocable Trust And Irrevocable Trust?
In the context of Medicaid planning and Medicaid asset protection, a revocable trust and an irrevocable trust have significant differences. In particular, a revocable living trust that you control is a countable asset under the Medicaid rules. Many attorneys who market themselves as elder law attorneys will claim that their revocable living trust products will protect assets from Medicaid but usually these trusts only protect assets from Medicaid in the event of the death of the first spouse to pass away.
Only certain types of irrevocable trusts are excluded assets. The main rule about the non-countability of irrevocable trust assets is that the irrevocable trust will say that the beneficiary who needs the Medicaid benefit does not have direct access, direct payment of principle distribution, or the right to withdraw the corpus of the trust. It’s an income only right to a trust or it’s a special needs trust, whereby the trustee can only make a distribution from the trust directly to the people who provide care to the beneficiary.
Why Is A Revocable Trust Useless When It Comes To Medicaid Planning?
A revocable living trust is useless when it comes to Medicaid planning because most revocable trusts include the right of the creator of the trust, who will later be claiming Medicaid benefits, to receive a principle distribution of the trust assets. If the person applying for Medicaid can give and take from a trust as he or she pleases, then the trust assets are countable to that individual. Ultimately, most revocable living trusts are completed and constructed for probate avoidance and are not generally used for protecting the assets of the trust’s creator in the event that the grantor needs Medicaid benefits. Asset protection for purposes of Medicaid qualification is best achieved by certain types of irrevocable trusts.
What Are The Advantages Of An Irrevocable Trust When It Comes To Medicaid Planning?
The big advantage of an irrevocable trust, when it comes to Medicaid planning, is that if properly created five years prior to needing nursing home Medicaid benefits, all the assets under the name of the trust are excluded and not counted as an asset for the Medicaid applicant. This is a very important benefit when acting ahead of time. The irrevocable trust provides a nice asset protection trust because you don’t have to sell any of your assets.
The advantage of the irrevocable trust versus gifting your assets ahead of time is that when you gift the money outright to your children, you have to claim federal income tax. If you gift to an irrevocable trust, all the income tax ramifications will flow to you, the person applying for Medicaid. This is important because typically, a retired senior citizen has less income and more deductible cost then a person who is working full time. In addition, the irrevocable trust, as opposed to gifting, provides some ability to control your assets. If you are not happy with the child who is managing the trust, you have the ability to remove that child from the management position of that trust and still qualify for Medicaid in the future. If you gifted the money and the child takes the money and spends it, there is very little right of recourse.
For more information on Medicaid Look Back In The State Of Florida, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.
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