Medicaid planning is one of those areas where a small mistake can become a very expensive mistake.

Families often come to us when a spouse or parent suddenly needs nursing home care. They may be facing a bill of $10,000 or more each month and trying to figure out what Medicaid will cover, what they are allowed to keep, and what they need to do next.

Unfortunately, there is a lot of bad information out there.

Michigan Medicaid has detailed rules involving assets, gifts, spouses, income, and financial transactions going back years. What makes matters worse is that some of the things families assume they must do to qualify are not required at all.

Here are six mistakes I would try to avoid.

1. Giving Money Away Without Understanding the Five-Year Rule

This is probably one of the most dangerous mistakes.

A family may think, “Mom can only have a small amount of money, so let’s give the rest to the kids.”

That can create a serious problem.

For nursing home Medicaid, Michigan generally reviews financial transfers made during the five years before Medicaid is requested. This is commonly called the five-year look-back period.

Certain gifts during that period can create a penalty during which Medicaid will not pay for nursing home care.

That does not mean families should never transfer assets. There are important exceptions and planning strategies. But don’t start giving things away simply because someone tells you Mom has “too much money.”

2. Spending Everything Before Getting Advice

Another common misconception is that you have to become broke before Medicaid can help.

You don’t.

Yes, Medicaid has asset limits. But Medicaid also has rules allowing certain assets to be protected, converted, transferred, or otherwise handled without preventing eligibility.

The options can be especially powerful for married couples.  Remember, Michigan has some special Medicaid planning techniques that allow us to protect ALL (yes, ALL) of your assets if one spouse is in need of long-term nursing home care.

Before spending tens or even hundreds of thousands of dollars on nursing home care, find out what planning options are available.

Once the money is gone, we cannot bring it back.

3. Assuming the Healthy Spouse’s Money Doesn’t Count

If one spouse needs nursing home care, families sometimes assume Medicaid only looks at that person’s assets.

Generally, that is not how it works.

For a married couple, Medicaid initially looks at assets owned by both spouses, regardless of whose name is on the account.

But that is only half the story.

Special rules also protect a spouse who remains at home. That spouse is often called the community spouse.

Good Medicaid planning looks at the entire financial picture and determines what can legally be protected for the spouse who is not receiving nursing home care.

4. Assuming the Healthy Spouse Has to Spend Down Everything

This mistake can be just as costly.

Families sometimes hear that the healthy spouse is only “allowed” to keep a certain amount and assume everything above that number must be spent on nursing home care.

That is not necessarily true.

In many married-couple cases, proper planning can protect substantially more than the basic Medicaid allowance — sometimes even all of the couple’s assets.

The important point is to understand the available strategies before spending the money.

5. Relying on Advice That Doesn’t Fit Your Situation

Medicaid advice has a strange way of traveling.

A neighbor tells you what worked for her mother. Someone at the nursing home tells you what another family did. A friend says you should put the house in the children’s names. An internet search produces an answer from another state.

The problem is that Medicaid planning is extremely fact-specific.

The rules can also vary from state to state. A strategy that works somewhere else may not work the same way in Michigan.

Even within Michigan, the right approach can depend on whether someone is married, what assets they own, whether gifts have already been made, whether a home is involved, and many other factors.

There is rarely one answer that works for every family.

6. Waiting Until the Medicaid Application to Start Planning

The application is often the last step in good Medicaid planning, not the first.

Before applying, we may need to review five years of financial history, identify transfers, restructure assets, protect a spouse, address the home, update powers of attorney, and determine the best eligibility date.

An incomplete or incorrectly timed application can create delays or even unnecessary months of private-pay nursing home expenses.

Sometimes we can accomplish a great deal even after someone has entered a nursing home.

But the earlier we start, the more options we usually have.

Why This Matters

At today’s nursing home costs, mistakes can become expensive very quickly.

A family should not spend $50,000, $100,000, or more simply because they misunderstood the Medicaid rules.

And they should not give away assets because someone told them that was the only way to qualify.

Medicaid planning is not about hiding money or doing something improper. It is about understanding the rules and using the planning opportunities those rules legally provide.

For married couples especially, proper planning can make an enormous difference in protecting the financial security of the spouse who remains at home.

Simple Lesson

Don’t spend or give away significant assets until you understand your Medicaid planning options.

A little planning before taking action can preserve choices that may disappear once the money has been spent or transferred.

Action Step

If nursing home care may be on the horizon for you, your spouse, a parent, or other loved one, review the situation before a crisis forces quick decisions.

Look at the family’s assets, income, prior gifts, home ownership, powers of attorney, and long-term care plans.

Even if nursing home care has already started, don’t assume it is too late. There may still be important planning opportunities available.

If this topic raises questions for you or your family, feel free to call (517) 548-7400 or contact us online: https://www.michiganestateplans.com/contact-us