Q: Was my dad's Income Only Medicaid Asset Protection Trust a good idea? Need to use trust income to pay for elder care.
About 6 years ago, my dad went into an assisted living facility and, AT THAT TIME, a lawyer put most of his assets in an Irrevocable Income-Only Medicaid asset protection trust. At the time, costs were reasonable ($3500/month) and he had a good Long Term Care policy. My dad went through with this plan. Well, 3 years ago, he had to move to a higher level of care assisted living facility ($7500 / month) and his LTC policy is now exhausted. In 2 years, he will be out of personal assets. I'm worried that the lawyer's plan isn't working as expected. She seemed to have anticipated him staying in the cheaper facility for much longer and then going to a Medicaid accepting nursing home if his health got worse. She didn't seem to anticipate his current situation, where he needed a higher level of care assisted living home, but not nursing. Is this an uncommon situation? What is the typical advice?
A: Except in California (where the lookback period is only 2.5 years), the Medicaid lookback period is 5 years. That means Medicaid pre-planning must be done at least 5 years in advance of the need for long-term care. When it comes to Medicaid pre-planning, an accurate crystal ball is extremely helpful, but nobody seems to have one that works, so all we can do is hope for the best.
Yes, it does happen that the Medicaid pre-planning client does not quite make it a whole five years before needing long-term care. When that happens you should go back to the attorney that did the planning and ask what the next step is. He or she did not do anything wrong, so you are not approaching the attorney to berate him or her. The attorney has a pretty detailed file and can re-calculate numbers based upon the current situation and make a recommendation. Number crunching is required to determine what makes the most sense financially. It might be best to private pay until the 5 year mark is reached and then apply for Medicaid. Or, it might make sense to "undo" the planning (gift everything back) and then do crisis planning using different techniques.
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