Medicaid Basics in Maryland, Part 4 - Medicaid Planning Strategies and Penalties

Medicaid in Maryland

Given the high cost of long term care, and the intricacies of Medicaid eligibility and applications, it makes sense to have some knowledge of the planning strategies, and the penalties associated with failing to plan or incorrectly planning.

Medicaid Planning Strategies

To protect your family’s savings, it’s important to have a Medicaid Planning strategy in place. Without the right planning, you or your loved one may lose your assets, be denied coverage, or face penalties from Medicaid.

Caregiver Agreements

A common way seniors protect their assets and maintain eligibility for Medicaid is to enter into a caregiver agreement with a loved one. This strategy allows individuals to compensate their family for the care they provide without facing a penalty from Medicaid. Typically, Medicaid does not allow an individual to transfer their assets or income to a family member outside of specific circumstances, however a caregiver agreement changes the tone of the transfer. When two people sign a caregiver agreement, they are stating that one person provides care for the other, who is giving them remuneration in return. For example, you may drive your loved one to and from their doctor’s appointments, even when they receive full-time skilled nursing care. Your loved one may wish to compensate you for this time using their own income, which would make it exempt from Medicaid penalties. Without a caregiver agreement, Medicaid will consider this situation as a voluntary gift given from one individual to another, and the Medicaid beneficiary will be subject to penalties.

For a caregiver agreement to be legitimate, it must be in writing and it must only apply to funds which have not yet been transferred. Two people cannot enter a caregiver agreement for funds which have already been paid. Additionally, the funds must be of a reasonable amount for the task being performed. For example, your loved one could not reasonably pay you $500 for a ride to a doctor’s appointment.

Lady Bird Deeds

Lady Bird Deeds are another popular method for seniors to protect their assets when they apply for Medicaid. When a homeowner receives Medicaid, they may place a lien on their assets to collect on once the person no longer needs care. This is common practice for Medicaid recipients with a substantial amount of property and high medical costs. However, many seniors do not want their property to leave the family following their death, and do not want Medicaid to place a lien on it.

A Lady Bird Deed protects seniors who want to keep their homes in the family by allowing them to transfer their property without probate. When a person applies for Medicaid, they must disclose any asset transfers for the past five years - known as a “look back” period. A person with asset transfers within the look back period are subject to penalties, as a means to deter seniors from giving away all of their valuable assets to qualify for Medicaid. However, a Lady Bird Deed allows an applicant to keep complete control over their property, while still transferring it to someone in their family, so it cannot incur a penalty.

Medicaid Penalties in Maryland

When a person applies for Medicaid, they are subject to a look back period to determine their eligibility. Because Medicaid eligibility is largely determined by income and asset accumulation, some individuals who do not meet the program’s financial requirements give away their resources in an effort to qualify for coverage. If this happens, the person may be subject to penalties, and may be disqualified from receiving Medicaid benefits.

If a person completes any voluntary funds transfers within five years of applying for Medicaid, they will receive a penalty period. During the penalty period, a person cannot receive Medicaid benefits. Maryland determines a person’s Medicaid penalty by dividing the total amount of gifts given by $8,684, which determines the number of months a person must wait before Medicaid will provide coverage. Without proper planning, Medicaid penalties can have a powerful impact on an individual’s ability to pay for their care, and should be kept in consideration as a person ages and liquidates their assets.

Contact a Wayside Legal Elder Law Attorney Today

Wayside Legal LLC is an award-winning law firm located in North Bethesda, Maryland, with experience handling Medicaid issues in Maryland, D.C., and Virginia. If you are facing a situation where you need assistance with long term planning, contact a Wayside Legal attorney today for a consultation to discuss your specific elder law issues.