When it comes to protecting your assets and planning for long-term care, the details matter, sometimes in surprising ways. In a recent conversation between elder law attorney Jeff Bellomo and Christine Oyler, Services Planning Coordinator at Bellomo & Associates, the two discussed lesser-known pitfalls that can derail your Medicaid eligibility if you’re not prepared. Christine brings nearly a decade of experience helping families navigate the complex Medicaid system and shared valuable insights to help you avoid costly mistakes.
This blog post is inspired by Jeff’s video: Planning Pitfalls: These Lesser-Known Factors Could Affect Your Medicaid Eligibility.
1. Education Savings Accounts Can Trip You Up
Many families wisely save for their children’s or grandchildren’s education using a 529 account. But did you know these funds can count against you when applying for Medicaid? These accounts are considered your resource, even though you set them up for someone else’s benefit. If you’re thinking about long-term care planning and Medicaid, make sure you disclose and plan for how these accounts will affect your eligibility.
2. Not All Gifts Count Against You
On the flip side, Uniform Transfers to Minors Accounts (UTMAs) are treated differently. Even if you transferred funds to a UTMA within Medicaid’s five-year lookback period, those funds are not counted as your assets. This distinction highlights just how nuanced Medicaid rules are and why professional guidance is crucial.
3. Estranged or Divorced? The State May Still Count Your Spouse’s Resources
It’s a common misconception that if you’re separated or estranged from your spouse, their assets won’t count toward your Medicaid application. In reality, you’ll need to prove you’ve been living separately with separate finances, and in some cases, even attend a hearing to show the court your circumstances.
Even more concerning, some people try to “solve” this problem by divorcing and giving 100 percent of assets to the healthy spouse (often called the “community spouse”). Not only does this raise a red flag for fraud, but it also leaves the healthy spouse unprotected from other financial risks.
4. Prenups and Wills Don’t Override Medicaid Rules
For blended families, prenups and carefully written wills are common tools to keep assets separate for “original” children. But in the eyes of Medicaid, these legal documents don’t change your spouse’s obligation to help pay for your care. Whether you have a prenuptial or postnuptial agreement, the state may still count the community spouse’s resources toward Medicaid eligibility.
5. Watch Out for CCRC Benevolent Fund Restrictions
Some Continuing Care Retirement Communities (CCRCs) offer a “benevolent fund” to help residents who outlive their money. But these funds come with strings attached. They may restrict the kind and amount of gifts you can make during your stay, and they won’t usually cover skilled nursing care. Also, entering a CCRC doesn’t disqualify you from Medicaid, but you’ll likely need sufficient assets in your name to pay the upfront costs even if your long-term plan includes a trust.
Why Work With Professionals?
These examples show just how easy it is to make an innocent mistake that costs your family thousands or even hundreds of thousands of dollars. Medicaid rules are complex and constantly changing. The best way to protect yourself, your spouse, and your legacy is to work with experienced professionals who understand how all the pieces of the puzzle fit together.
At Bellomo & Associates, we’re committed to helping families avoid the mistakes we’ve seen far too often. Register for a free workshop today to learn more about protecting your family and your future.
👉 Register for a Workshop or call us at (717) 845-5390 to schedule a consultation.
