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Medicaid Planning in Virginia for the Middle Class

Medicaid Planning in Virginia for the Middle Class
6 minutes
Kristina Beavers

Medicaid is a government funded program that helps people in need care for themselves and their children. It gets confusing because Medicaid for children provides a type of health insurance, while Medicaid for the elderly provides funds for daily care.  And while you may have never used any sort of government funded programs before, it’s possible that Medicaid Planning could be a valuable component of your overall Estate Plan. Let’s get into it. 

Life Has Curveballs

Bernie Madoff, market crashes, con men… life can be complicated. Even those people who have spent their entire lives doing all the right things can end up with very little funds when they are old and no longer able to work. Bad stuff just happens, so what can you do about it? If you or a family member are dealing with a financial reversal later in life, you have options. 

Medicare and Medicaid are different

Medicare is a government program that provides medical care...think of it as health insurance (because that is essentially what Medicare provides).  But Medicare does NOT pay for assisted living or care that is not necessary to get you through a health crisis.  That’s where Medicaid comes in.  

Medicaid is a Safety Net to provide for daily care when you can’t afford it yourself.  But it works much better if you do some planning first.

2021 Allowable Assets for Virginia Medicaid

In order to qualify for Medicaid in Virginia you must demonstrate financial need. Thankfully the government has broken up assets into countable and non-countable.  Some things, like your monthly income, is counted as an asset, while some other things, like the value of your primary residence, isn’t counted toward your assets when determining financial need. In fact, as of 2021 you can have as much as 603k in equity for your main residence and still qualify for Medicaid in Virginia. Here’s a chart for the variety of countable asset limits for 2021



Medicaid Asset Transfer Rules 

So here’s where the planning comes in. Like most states, as of today, Virginia has a 5 year “look back” period when it comes to Medicaid asset transfers. That means you can’t just give your kids whatever amount of money or assets so that you can then qualify for Medicaid. And you can’t just move either because the shortest look back period is in California and that’s 30 months.  And you also can’t just sell your home to anyone (including your kids) for an amount that is less than the Tax Assessed Value...even if your particular home will not sell for the Tax Assessed Value because it needs a lot of fixing up to even get it sold at all.

If you know 5 years ahead that you will want to qualify for Medicaid then in theory you can just give your property away to your kids or to anyone else. However there’s nothing stopping the Government from increasing the look-back period in the next five years. So that’s not the most solid plan. And it only gets more complicated from there. Some asset transfers are allowed within the look back period. Let’s say you gifted your assets to a blind or disabled child. That’s probably going to be allowed and will not incur a penalty.  But again, there are a lot of details to consider and it is almost never as easy as it sounds.

If you are found to have transferred assets within the look back period you will incur a penalty.  And that penalty essentially means you will need to pay your expenses out of your own pocket for a certain number of months. Of course, if you can magically come up with the funds you might delay your Medicaid approval even further. 

Revocable vs Irrevocable Trusts

Your Virginia Estate Planning Attorney will help you decide the best way to handle your assets. One option you might consider is to establish a Trust.  There are also different types of Trusts.  The simple difference between a revocable and irrevocable trust is that a revocable trust is something you can change after creation, whereas an irrevocable trust means you no longer have the ability to change the Trust itself, and you also have no control at all of any of the the assets that have been transferred into the Trust 

Let’s say you create a trust and you name your longtime fishing buddy, Steve, to be the beneficiary. You have known Steve your whole life and you trust him to do what’s right. Fantastic. But if you create the trust as an Irrevocable trust there are no legal consequences to Steve if he drains the account as long as he follows the rules set out by the trust. And no, you can’t make Steve the beneficiary and have one of the rules be that he has to give you the money if you need it. 

As far as Medicaid is concerned a revocable trust (one you can change) is an asset whereas a irrevocable trust (one you can’t change) is not. Though in both cases the actual creation of the Trust must be completed before the look back period because it is an asset transfer. Think of it this way, Medicaid doesn’t want to foot the bill if you had 60k a couple years ago that you gave to Steve. That 60k could have gone to the medical bills that Medicaid is now covering. 

Medicaid Wants to Get Paid

Another thing to keep in mind is that Medicaid has a long memory. If you win the lottery at 90 years old and you have been on Medicaid for the last 20 years, you will get a bill from Medicaid for past expenses. And after your death, Medicaid will be a debtor on your Estate. So when your assets go through Probate, one of the debtors in line will be the Federal or State Government seeking repayment for what they paid for your Medicaid expenses.  And remember that primary residence that wasn’t counted when you qualified for Medicaid?  Well, Medicaid will also want your estate to sell that house so the value of the home can also be used to pay Medicaid back for what they spent.

Medicaid for the Middle Class

Our law firm helps people every week that are brand new to government assistance. As Americans we value individual freedom and personal responsibility. It can be downright uncomfortable to use a government program. Unfortunately that often keeps the middle class from benefitting fully from these valuable programs. Working with a Estate Planning Attorney can save your family money and stress by preparing for whatever comes next. 


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