Planning for your senior years is a complicated and emotionally tough task. It is often made all the tougher by the myriad misconceptions that exist about your options. There is a lot of misinformation about all aspects of senior planning, from nursing home decisions to appropriate legal documents and structure.
In this third article in a four part series, we will discuss the next 7 common costly misconceptions about planning for your senior years. We hope this discussion will help set you on the right track and make your planning decisions easier.
Misconception #14: Legally, you can give away only $14,000 to each of your children each year. Not true. Under federal tax law, you can give away any amount, but you have to report gifts in excess of $14,000 per recipient per year to the IRS ($26,000 if husband and wife each make a gift). However, there is no requirement that you pay any gift tax unless you have exhausted the lifetime exemption amount. Don’t confuse this law with the Medicaid gifting rules in Misconception #12.
Misconception #15: You can wait to do long-term planning until your spouse or you get sick. Yes, to some degree. However, you and your spouse will be much better off if you have taken important planning steps in advance, before a crisis occurs. What stops most people from being able to plan effectively when they are in the middle of a crisis is that the ill person is unable to make decisions and sign the necessary legal documents.
Misconception #16: You have to give away everything you own to get Medicaid. Not true. You are permitted to own some property and still be eligible for Medicaid. The challenge comes in knowing what property is “countable” and what is “exempt” under the Medicaid rules. For a married couple, the family home is exempt as long as the healthy spouse occupies it. Regardless of whether you are married, certain types of prepaid burial contracts are non-countable. Other types of property are exempt as well. Bottom line: You don’t need to be completely without resources to be eligible for Medicaid.
Misconception #17: You can keep all of your marital property and your inherited property when your spouse gets Medicaid. Not true! When a married person applies for Medicaid, resources in either or both spouses’ names are reviewed by the Pennsylvania Department of Human Services. You can keep the resources that are exempt. And you will be allowed to keep a portion of the “countable” resources if your spouse enters a nursing home and qualifies for Medicaid.
Misconception #18: If you put your property into your spouse’s name, you will make yourself eligible for Medicaid. No. Resources are counted, regardless of which spouse’s name they are in. However, in most situations, it is advisable to transfer title to the home to the spouse who is not in the nursing home.
Misconception #19: If you enter a nursing home as a “private pay” resident, you must use up all of your resources before you can get Medicaid. False. You are not required to use all your resources to pay privately for nursing home care. However, some nursing homes want you to believe this is true. Nursing homes charge private-pay residents much more money than Medicaid pays them. This is why they want you to spend all of your money before they start to accept Medicaid payments for your care. With proper planning, you can often protect much of your savings for your family. Be careful.
The final part of this series on medicaid planning is now available.