Dear Clients and Friends,
Here are some specific questions and my answers regarding the Medicaid look-back period which I think will benefit many of you.
CLIENT QUESTIONS:
Thank you for your newsletters, I find them very informative. Recently I had some questions related to Medicaid and the 5-year look-back, which I was hoping you could assist with.
1) My house is in an irrevocable trust, which you established for me in 2007. If I were to add 2 life insurance policies to this trust, would that be included in the Medicaid look back? What impact might they have on the look-back if they are considered?
2) Are there any other options for the policies that could avoid being subject to the look-back period?
3) If I were to make pre-paid funeral arrangements, would they be considered part of the $15k asset limitation allowed by Medicaid?
If you would kindly respond to this email, so that I can be sure to keep a record of your response, that would be appreciated.
Thank you for your time and assistance. I look forward to your next newsletter.
MY RESPONSE:
Thank you so much for your kind words. So here we go…..
Your house is fully protected because it was transferred into the irrevocable Medicaid trust more than 5 years ago. Don’t mess with it! Technically, you could add any asset to the trust now, including a life insurance policy (actually the amount transferred would be the cash surrender value, not the death benefit), but I don’t want you to. Any addition to the trust at this point would create a new 5-year look-back….that’s not really the whole problem. The problem is if you need a nursing home within the next 5 years. In such a case, I may want to return the gift to you to eliminate the 5-year look-back on the secondary transfer, but if we do that it would taint the original transfer of the house, even though it would be more than 5 years ago.
The better strategy is not to add any assets to the trust. Instead, consider transferring assets directly to the children or to a second trust. If you do not make the next 5 years, your children or trust (yes, there are ways) can (but do not have to) return the assets to you, eliminating the second 5-year look-back without tainting the house which is already protected. Whew! Got it?
We won’t avoid the 5-year look-back (unless some exception applies, which is beyond the scope of this letter), but we will continue to protect that which we worked so hard to protect.
As for the question about pre-paid funeral arrangements, which I wholeheartedly recommend, they can be set up so that they will be exempt, that is, not counted toward the $15,900 allowed. You do this by working with the funeral parlor to create an irrevocable funeral trust. What is that? Basically, an account set aside at the funeral parlor, for your funeral, that you cannot get back. The funeral home will know what you are talking about it if you ask them for a Medicaid safe pre-plan.
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
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As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
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Stay safe!
