In this episode, Michael Bailey, the Mobile Estate Planner, tackles the often-confusing world of Medicaid. By focusing on both traditional long-term care needs and potential Medicaid recovery scenarios, he offers practical advice for proactive estate planning. Whether you’re looking at asset protection trusts or considering how Medicaid affects your estate, Michael provides essential knowledge to navigate these waters successfully.
Welcome to Mobile Estate Planning with your host, Michael Bailey. Over a decade ago, attorney Michael Bailey turned his attention to estate law after he recognized the unacceptable number of adults without proper end of life planning. Michael recognizes that many of his clients have difficulty finding the time for making a proper estate plan. That’s why he became the Mobile Estate Planner. He will go to wherever you are to assist you with your estate planning, including writing wills, trusts, and giving you the information you need to avoid probate. Now, ATX, Ask the Experts, presents Mobile Estate Planning with your host, Michael Bailey.
SPEAKER 02 :
Good afternoon. Welcome to Mobile Estate Planning with Michael Bailey. So we can do something besides just leave your family alone. You are listening to KLZ 560 AM, possibly on 100.7 FM. Also available option is the KLZ 560 radio app. If you would like to talk to me on the air, my phone number, the studio line is 303-477-5600. And again, studio line is 303-477-5600. And my direct line is 720-394-6887. Once again, that’s 720-394-6887. So if you want to call me on the direct line, I probably will not answer right now because I’m on the air for the next half an hour. But if you want to talk to me in the studio line, please feel free. So I got a very interesting call. It was a voicemail from a lady who had called me and she was asking about… She said something about how she was on Medicaid and then she was talking about how she felt like she was duped into getting on Medicaid or something along those lines and how she was not properly told everything that she needed to know about Medicaid. And so now she was looking to, I think she said, sue the company that had told her about Medicaid and that she wanted to know how she could make sure that she doesn’t have to pay anything back to Medicaid. and i was listening to this message thinking to myself ma’am i don’t have any idea what you’re asking me here because it was kind of all over the place and i was not quite sure what it was that she was asking of me so i called back and of course i only got voicemail because why would i get a full you know that would be silly um but i’m happy to try to reach this person and talk to them So they’re talking about Medicaid, and Medicaid is an interesting thing because there are lots of aspects. There’s parts of Medicaid that are – if you’re young and you don’t – or if you’re poor and you don’t have health insurance, so then Medicaid is an option there for you. So Medicaid is there to help fill in the gaps of people who may or may not be – They may not be able to obtain health insurance any other way, so they have Medicaid. But Medicaid is also a program that will pay for long-term care. And so they’re both Medicaid, but they’re not always… They’re not necessarily the exact same program. They’re both run by Medicaid, but there’s one for kind of long-term care. But they’re both for people who are kind of running out of money, so to speak. And so with that, you have to be very careful about planning for Medicaid. I don’t do a lot of Medicaid kind of what I call crisis type of planning because the crisis type of planning is, hey, I need to be on Medicaid. or my mom or dad is going into a long-term care facility next week, so we have to try to protect our assets from Medicaid, so what can we do? Well, the first thing is it might be a little bit too late because Medicaid has some – very strict asset limits. And they’re not super keen on people going and trying to get around those asset limits. So the asset limit for an individual is you have to have less than $2,000 worth of assets. Now, we probably all can agree that $2,000 is not exactly a giant amount of money. I mean, if you have no money and you’re looking for money and you get $2,000, that can seem like a giant amount of money. But if it’s $2,000 to… pay for life and long-term care coverage over the course of a long period of time, $2,000 just, it doesn’t last as long as you might think. My daughter, we go tomorrow to pick her up from college. She’s finished her freshman year. She took her last final yesterday, so now she is packing everything up today and we’ll go get her tomorrow and get her all checked out on Friday and drive home probably on Saturday. She has learned that life is not quite as cheap as one might hope when she was out in the world she she took she went to college she had a full scholarship so full tuition scholarship she’s pretty excited about that well the kind of scholarship she had she had to reapply for each year so she did and apparently she didn’t quite understand that when you’re going to be a returning student you need to apply for a full scholarship not only with the university, but also with the college that you’re in. So she applied just with the university, not understanding she also needed to have a separate application for her own college within the university. And so she was awarded a half tuition scholarship But the other half, if she had gotten one from her college as opposed to her college or department, instead of the university, she could have ended up with full tuition again for next year. As it stands, those deadlines were the same deadlines. So they were the same deadlines. They were the same day, and so she missed one deadline, and so next year she will pay half tuition. Now, that half tuition happens to be $3,500, so it’s $3,500. Well, that’s not a huge amount. It’s not a tiny amount, but it’s… more than the $2,000 that Medicaid allows. And so, you know, she has learned that, hey, we need to make, you know, she needs to pay attention to deadlines and hit them and apply for whatever scholarships are available and things like that. You know, it’s just one part of the game that you learn how to play, both in college and in the real life and the rest of the world. I mean… Oftentimes, we are not going to get completely full, 100% accurate, everything from the beginning to the end information on what a government program like Medicaid would be. So, you know, and if Medicaid, if someone’s saying, oh, hey, we need to get you on Medicaid, usually they’re doing that because you are going into you have some sort of health need and health coverage. And so we’re going to go in. Let’s say that you’re someone who has never really had health insurance. And then you become injured and you’re like, oh, hey, we’re going. So they take you to the hospital and they’re like, oh, hey, your injuries are such that we need to do an emergency surgery on your abdomen. You know, it’s probably going to be a $50,000 to $60,000 enterprise. And you say, well, wait a minute. I only have, you know, $1,500 in my bank account. I can’t afford $50,000 to $60,000. And they say, well, let’s get you signed up for Medicaid. Okay. Because then we can bill Medicaid and you can get your surgery, which you need almost immediately right now, so we can get you taken care of. And you go, okay. Now, in that case, there’s kind of an emergency there you need to be worked on. But who’s going to have the time to take and explain all of the ins and outs of Medicaid and all of the ups and downs and lefts and rights and all of those things? it’s probably not going to happen. They’re saying, hey, at this point, we have an emergency. We need to be able to bill somebody and you’re not going to be able to pay us. So we get you enrolled for Medicaid and then we can bill Medicaid. And, you know, that’s just, I mean, that one makes sense. But Medicaid is, I mean, it’s a complex program. There’s anything that the government does tends to be fairly complex. So there are lots and lots of pages of regulations and lots and lots of ins and outs and lots of ups and downs, lots and lots of loopholes. And, you know, there’s a loophole within a loophole or a cover to the loophole. So there’s just so many different things that being able to, that saying, oh, hey, when I go on to Medicaid, I need to understand everything. It’s kind of a losing battle. So you are listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM, also heard on 100.7 FM or the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, that’s 720-394-6887. So when you’re looking at Medicaid, a lot of crisis planning where it’s kind of in the moment or hey, we need to get mom on time. Mom signed up for Medicaid because mom’s going into long-term care next week and we don’t have the assets just to pay for that because we’re not multi-billionaires and ridiculously rich. I suppose even if you are a multi-billionaire, you probably have enough to pay for long-term care. But most of us are not multi-billionaires. I know I am not. I’m reasonably certain Luke is not. I’ve met a couple billionaires, but I’m not one of them. So you know, there’s different planning, pre-planning versus crisis planning. Crisis planning is kind of, hey, we’re out of time. The type of planning that I will do is pre-planning, where we say, okay, we’ve got, you know, where someone is, you know, they just turned 75 and they’re slowing down. They’re like, oh, hey, I would like to plan ahead so that my assets don’t get picked up by long-term care if I need it down the road. You know, right now I’m in okay health, but That could change at any moment. So that type of planning, you look at it and you go, okay, well, we’ll see what we can do. Now, there are asset protection trusts, but the asset protection trust, you move assets into the asset protection trust. And those asset protection trusts can provide some sort of place to stash assets so that they wouldn’t get picked up by Medicaid in the future if you needed it. But the thing is that when you stash assets there, there’s a five year look back period that comes into play, which means if you move assets out of your name, you ideally would wait five years before you apply for Medicaid. Because Medicaid will, when you apply for Medicaid, they’ll look and say, okay, did you give anything away in the last five years? Or did you transfer anything for less than full fair market value? Cause you’re like, oh, I’m not going to give it to my kids, but I’ll sell them my house for $10. Sure. It’s a million dollar house. Medicaid will look at that and say, okay, so you gave away $9,999,990. Okay. So if you transfer assets for no or for less than full firm value that you receive in return, that transfer is going to count against you. And the way it works is Medicaid says, okay, so you transferred this million dollar house out of your name three years ago. You didn’t receive anything in return. So now you only have $1,500 in your bank account. But we’re going to count that million dollars against you. And that million dollars against you, we’re going to divide by our number, which is something like $6,500. It’s a different number, but it’s an easy one. So we’re going to divide it by $6,500. So we’re going to go, okay, you gave away a million-dollar house. You’re perfectly capable of doing that. And we’re going to divide it by $6,500 a month, which is our number. So we say you will now be ineligible for Medicaid for the next 153 months. We should divide that by 12. That is the next 12.8 years. So because you gave away a million dollar house, you will now be ineligible for Medicaid for the next 12.8 years. So good luck figuring out how to pay for life for the next 12.8 years. That may not be the solution that you’re looking for. Because if you give away a million dollar house and you get passed the… um you get past the uh eight million or the the five years they’ll look back and say oh did you give anything away the last five years you’re like nope okay cool well so then your kids you know or if you put something into an asset protection trust they’re holding on to a you know they’re holding on to a million dollar asset but it doesn’t count against you because you got past the five years But so one of the things, one of the strategies that goes into it is, okay, if we start the clock now and let’s say in three and a half years, we go, okay, so 3.5 years from now, now we need Medicaid, right? Okay. Well, let’s say that we need long-term care. So we go 3.5 years. So we have 1.5 years left, right? So we’ve got 18 months left. And 18 months is going to cost, say, $10,000 a month in the in the care that you need. That’s $180,000. Well, if you give away a house worth a million dollars and now you have $180,000 that you can need to pay in the next year and a half, which is better to come up with $180,000 or come with a million dollars and not be eligible for Medicaid for a little over 12, for almost 13 years. So we say, okay, we’ll come at $180,000. Maybe we have the kids that you gave that house to, they go get a home equity line of credit on it or something like that. And now we go, okay, we’ve got $180,000. So if we gave a million-dollar house, we get a loan for $200,000 for ease of numbers instead of worrying about 180,000. And we say, all right, cool. Well, we’ll private pay for long-term care for the next year and a half. And then we can apply for Medicaid. And then we’ll have saved only $800,000 on the million-dollar house instead of the full million-dollar house. Okay, we could probably do that. Well, what happens if mom is trying to go into the nursing home next week? You say, well, we’ll take that million-dollar house. Let’s say it’s going to be, so for five years, right, times 12, 60 times $10,000 a month. Now we’re saying, oh, well, we need to do $600,000 a month. So we cut in half what we’ve been able to save. So the techniques that I do and that I know how to do are kind of early. You’re planning ahead, not at the last minute. And so at the last minute, it becomes difficult to say, oh, hey, we’re going to be able to somehow avoid paying back Medicaid because that’s the thing. is Medicaid is a program where they will pay for your care, but as soon as you die, they’re going to look and see what assets do you have and how can we collect from them. And that’s the part that I think the person who left me a message was complaining about not being told. So if you, let’s say that you’re, it’s not a million dollar house, let’s say it’s a $300,000 house where most, yes, much more understandable. I mean, it is Colorado and real estate prices have gone up, Well, let’s say you have a $300,000 house. Okay, cool, $300,000. Now you go into long-term care. They’re not going to come and take away your house. If you intend to return to the house or if you live in the house and get your care there, they’re not going to come and take away your house. They’re going to say, okay, well, it’s unfortunate. So let’s say that Medicaid, over the course of a couple of years, pays $250,000 for your care. That’s nice of them. And then you die. Well, now we have a $300,000 house and Medicaid has paid $250,000. Well, that $300,000 house, the kids say, oh, well, it’s going to transfer to us. You know, we’re going to inherit the house and we’ll be good. And Medicaid says, yeah, not so fast. We think that we need to be paid back out of that house because it was mom’s house and not your house. So that $300,000 that it’s worth, when you sell it, we’re going to take our $250,000 out of the estate. We’re going to recover our costs from the estate to the extent that we can. And then the extra $50,000, you can have that, kids. Now, if it happens to go the other way, say you’ve got a $200,000 house and you end up in long-term care for lots of years and you owe 500. And so there’s a $500,000 Medicaid amount that’s spent. Then Medicaid is going to say, oh, well, we’ll sell the house for $200,000. We’ll take our $200,000. And then the other 300,000, if there’s no more assets in the estate, we’ll just kind of eat it and let it go. But Medicaid isn’t, they don’t want to spend a whole lot of money that they can’t recover if there’s an available option to recover that money. So that’s kind of what they do. They look to recover money from the assets that are available. And I think that’s part, I think that’s what this person on the phone was saying was that They didn’t get told that. So now she’s panicking because she’s on Medicaid and, oh, they’re going to take the house and not give the money to her kids. And the correct, the response is, yeah, that’s kind of how Medicaid works. But, you know, she may not have known that. And yeah. whatever the circumstances were that put her on Medicaid. You know, she is now, of course, very concerned about that. And I think that’s where the suing wants to come in if she wants to sue whoever didn’t tell her about that. And I mean, I understand where she’s coming from, but I also understand it’s nearly impossible to inform everybody about everything and every aspect that might ever exist for a government program. So you are listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM, also heard on 100.7 FM. You could also be listening on the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. My direct line is 720-394-6887. Once again, 720-394-6887. So Medicaid is a wonderful program. It’s a great program for those who are lower income or have run out of money for whatever reason, or you’ve just had enough medical bills that it’s eaten up all your savings and everything. It’s a great program to make sure that people who need medical care aren’t just going to be turned away because they don’t have anything to pay with. Yeah. I mean, if that were the case, then, you know, when I was a kid and growing up and didn’t have any money, I mean, unfortunately my parents had health insurance, but they would take care of me and they would pay for things. And I do the same for my kids. But if we ended up on a spot where Um, but if you’re in a spot where you can’t, uh, if a spot where you can’t have, you can’t pay for things, it’s nice to have that bake up or so that bake up back up there. Nice to have that back up there so that it’s a, um, it’s one of the, um, one of the things that you can’t just sit there and try to figure out how to do Medicaid on the whim. And you don’t want to have Medicaid. It’s a great program, but I also describe Medicaid as it is not the Shangri-La of medical care. You know, I mean, having been to many of the long-term care facilities, like my cousin came recently a few years ago, and she performs in a band called Mixed Nuts. And they came and they were performing at one of the higher end or senior centers here, higher end kind of assisted living, independent living, memory care type of facilities. And my dad had let me know that they were coming. He said he was going to try to come down from Fort Collins to see her sing, but then it just didn’t work out. So my wife and I and our youngest son went down to watch her sing. And, you know, so we’re sitting in this nice kind of ballroom thing and on nice couches with people who are there. And they’re the ones who, you know, they’re not necessarily the billionaires, but they can afford to live in a place like that. I’ve also been, like as a youth, we went to places, and we still do now, kind of we’ll take our youth groups, and you kind of come Christmas time, you’ll go Christmas caroling, you go Christmas caroling to the proverbial nursing home, and that’s where we need the sound effect, the dun-dun-dun, the nursing home type of thing. Well, when you go into a Medicaid facility, you’re probably not going to find a ballroom at all. You’re not going to find a nice ballroom for sure, and you won’t find comfortable couches you can sit on in the ballroom. You’ll probably find some sort of linoleum or concrete flooring, and it will probably – they tend to be a little bit understaffed, and they don’t exactly hire five-star chefs to work there. So everything feels a little bit dark and dingy and just how it is compared to a nicely lit ballroom for somebody who’s paying $25,000 a month to live at the higher end place. Now, of course, they’re paying for that so that they have both luxury and the care that they need. And it’s wonderful that there’s a place for someone who… in a medicaid setting isn’t just being kicked out onto the street and said hey good luck with that you know that’s we we as a society it’s it’s nice that we take care of or try to take care of people but medicaid is not i mean if that’s your first choice of where you want to be on health insurance or long-term care insurance it might not be the greatest plan ever so Although Medicaid is a wonderful program and it’s a good program and it’s a nice thing to have, it’s probably not the, oh, gee, I wish I really could be on Medicaid because what I really want to be is on Medicaid because it’s the biggest thing ever. And I hope that Medicaid can take care of me for forever. Maybe that’s just me, but I don’t like to rely on the government for much of anything. I appreciate that the government has a military so that we’re not under constant threat of being invaded by It would be like the reverse of Canadian Bacon. In Canadian Bacon, it’s a movie. The president wants to invade Canada to show because people are – the wartime president is more likely to be elected. Well, you know, if we had no military, then maybe Canada would invade us. You know, they would probably invade with their politeness. And, you know, it might get stopped in New York where there’s not exactly a lot of politeness that goes on. So we could have politeness wars in New York of… you know, who’s going to defer to whom. But if we don’t have the military, you know, that might not be a great thing. I do appreciate that governments set up laws that say, hey, when you drive, you should stay within your own lane and not, you know, come over and crash into me. Like that the government says, yes, if that’s his house, he’s allowed to lock it up. But no, you can’t just go in. You know, these are nice things I appreciate from the government. But the government giving me, you know, paying for my health care, my health insurance, or the government paying for, whatever else I have that’s necessary for life. I’m more a fan of trying to do that on my own. My 19 year old, we did not send her with a car to school this year because we wanted her to become more fully ingrained and enmeshed in the campus and involved in everything. Next year, she’s going to live off campus. We will probably send her with a car so that she can get to the grocery store and do all the things she needs to do. But there was a town, there was a city in the Soviet Union where they decided they would have all the cars in common. So they just put a whole bunch of cars on the street and people would go drive them. And unsurprisingly, within six months to a year, none of the cars worked. And because nobody had any sort of ownership, they wanted to take over any of the cars. So nobody was fixing them. Nobody was putting gas in and they figured somebody else would do that. Well, I’m a big fan of taking responsibility for your own life. So if I can avoid Medicaid, I would. But I’m glad that it’s there as a backup in case something happens. So thanks so much for listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ AM. Stay tuned. John Rush and Rush Reasoner up next, and I’ll be back next week. Thanks and bye.
SPEAKER 01 :
Mobile Estate Planning with Michael Bailey will return to ATX next Wednesday at 2.30 here on KLZ 560, AM 560, FM 100.7, and online at klzradio.com.
