You may have heard about a friend needing to “spend down” their money to qualify for a long-term care facility. “Spending down” is a technical term attorneys use to describe how to qualify for Medicaid benefits. This blog will help explain what “spend down” means and why it may be an option you want to consider with an estate planning professional.
What is “Spend Down”?
You may be considering what to do if you need long term care. If you want that care covered by Medicaid, you need to qualify. To qualify under the Medicaid guidelines you must be considered “low income.” When your income is too high you may need to spend down your assets or income to qualify.
How Low Do I Need To “Spend Down” my assets?
Each state manages Medicaid spend-down differently. Some find the entire qualification process stressful and overwhelming. They don’t want to make a misstep and find themselves ineligible for Medicaid. Remember, Medicaid won’t come into effect until you submit the medical bills that make up the “spend down” amount.
In Florida, there are many different options to help “spend down” your assets. Your options include personal services contracts and qualified income trusts. It is best to speak with an elder law attorney if you are considering these options. No matter which option you choose, you must meet the federal guidelines for a low-income individual.
I have Medicare, Why Do I Need Medicaid?
Many people get confused about the difference between Medicare and Medicaid. Medicare is a health insurance program that helps you pay for doctor’s bills and hospital visits. Medicaid is a need-based program to help care for vulnerable people, like the elderly and special needs persons.
You cannot use Medicare for long-term care facilities, you may only use Medicaid if you qualify. You can find out more about the difference between Medicare and Medicaid here.
The 5 year Spend Down” Look Back
So, you think you can give your money away to your child to qualify immediately for Medicaid? Think again. When it comes to spending down your retirement money, Medicaid it covered. Medicaid stops fraudsters with the “five-year look back.”
For the five years prior to claiming Medicaid benefits for long term care, Medicaid will review all of your finances. If they suspect fraud, they will reject your claim and may bar you from Medicaid benefits for years.
If I Can’t Give It Away, How Can I Spend It?
While gifting your money is one of the many things you can’t do, you have other options. After all, Medicaid is not trying to ruin your life. They simply want to ensure you are not trying to defraud the government. Remember, your goal is to make the most comfortable life for yourself, then you can worry about your heirs!
So, go ahead and spend it down if this is what you would like. But be sure to follow the rules so you don’t have a “financial hangover” later. Here are some popular options to help “spend down” your funds and qualify for Medicaid.
- Family Vacations
- Gambling Trip to Vegas
- Spending on Services – Attorney, Accountants, Etc.
- Spending on Equipment – TV, phone, tablet
- Paying Off Debts
- Remodeling Your Home
- Paying Down your Mortgage
- Purchasing a New Car
- Burial plots & Funeral Expenses
What Happens if I don’t “spend down” my money?
You cannot be forced to spend down your money. Some choose to keep the money and live independently as long as possible. However, if you ever need long-term care, you must use that money and assets to pay for your care. You cannot use any funds from Medicaid before spending almost all your money on care.
This is why some people choose to spend down their money before they go into a long-term care facility. They want a last chance to enjoy life to the fullest and set themselves up for a great long-term stay.
Don’t wait too long to start your Medicaid planning. By being proactive, you can avoid costly mistakes. You can read more about elder law in my blog entitled, “Elder Law vs. Estate Planning.” Elder law is complicated. Please do not act based on blogs alone. See a reputable attorney to devise a plan that works for you.
Lori Vella is an Estate Planning and Business Attorney. She works virtually throughout Florida and New York, but has her home office in Tampa, Florida. She is mom to a little boy which ignited the passion for helping other families. She and her son enjoy car rides, playgrounds and taking mini-adventures. They also have an organic garden that surprisingly yields vegetables. Lori considers herself well-versed in Seinfeld and welcomes any trivia!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.