A lookback period is just one way Medicaid can shrink your estate

On Behalf of | Aug 31, 2020 | Estate Planning

When an older adult could have medical needs that exceed the coverage they will receive through Medicare, applying for Medicaid may become necessary. Planning for the potential need to qualify for Medicaid is important for those close to retirement age.

If you don’t have a plan in place, you could wind up incurring a penalty. Generally speaking, if you have transferred assets during the look-back period prior to your application, you will have to pay that same amount for medical care before Medicaid will cover you.

Many people plan for the complex Medicaid application process to protect their legacy. What they may not realize is that they will also have to consider the other major way that Medicaid might diminish their legacy or estate. Typically, Medicaid may go after your estate in an attempt to recoup benefits paid on your behalf.

Your executor may have to liquidate assets to repay Medicaid benefits

Before the person that you named as executor can begin to distribute your assets to your family members and loved ones as part of estate administration, they have to fulfill certain obligations. They will first have to repay your creditors, as well as file and pay your final year’s income taxes.

Those who handle the estate for someone who received Medicaid benefits may also be subject to a requirement to repay those benefits if possible. Medicaid can and often does seek to recover paid benefits by bringing claims against the estate of a beneficiary once they die.

Unless you diminished your assets by making strategic gifts to loved ones or using your assets to fund a trust, it’s possible that the executor of your estate will have no choice but to use the assets that were supposed to comprise your legacy to repay the Medicaid benefits you receive during life.

Asset protection planning should be a part of your long-term care plan

You probably didn’t spend a lifetime saving and building up your assets just to lose it all in your last years and have nothing to leave behind for the people you love. The sooner you begin planning for your possible long-term care needs and to protect your assets, the more control you will have over your resources when you are still alive and your legacy after you die.