I am thinking about a meeting I had recently.  The daughter of a client came to discuss her mother’s situation.  Mother is elderly.  She suffers from congestive heart failure.  Recently, she was so weak that she was hospitalized for a while.  Then she was transferred to a nursing home.  For now, Medicare is paying for the nursing home cost.  When Medicare stops paying in a few weeks, mother will have to pay the bill herself.  This nursing home costs about $10,000 a month!  Daughter met with a social worker to discuss finances.  The social worker found out that mother has saved up quite a bit of money.  Medicaid will not pay for mother’s nursing home costs until she has less than $2,000.  The social worker advised the daughter that mother should “spend down” her money until she has less than $2,000.  She suggested different ways that mother could spend down the money.  When mother heard that she could not give money to her daughter and grandchildren, she was upset.  She had worked hard and saved money.  She wanted her daughter and grandchildren to have it. 

            Some of the advice given by the social worker was correct.  Some of it was wrong.  I told the daughter that it is not true that mother has to spend all of her money.  Some of it can be given to the daughter and grandchildren.  The social worker’s advice would have resulted in the unnecessary loss of tens of thousands of dollars.  I do not blame the social worker.  She was trying her best to help this family. 

            It is just impossible for anyone to give proper advice for Medicaid Planning unless the person is an expert in it.  The Medicaid laws are very complicated.  There are federal Medicaid laws and state Medicaid laws.  The Hawaii Administrative Rules on Medicaid are very complicated.  The Department of Human Services has internal memos and policies regarding Medicaid that are generally not shared with the public.  There are interpretations of rules which I believe are in the heads of specialists at the Department of Human Services which are not written down.  The only way a person can become an expert in Medicaid Planning is to spend years studying the law and actually working on Medicaid cases to see how the rules are interpreted.  As I have explained some of our creative Medicaid Planning techniques to Medicaid eligibility workers, I have discovered that the vast majority of Medicaid eligibility workers who handle Medicaid applications every day are not experts in the Medicaid law.  In my opinion, among the thousands of attorneys in Hawaii, less than 1% are experts in Medicaid Planning.  I had a case last year in which a woman came to me after being given wrong Medicaid advice by an attorney who specializes in Estate Planning, but not Medicaid Planning.

            If you have a loved one in a nursing home or about to enter a nursing home, you cannot rely on the advice of friends or relatives.  You cannot rely on the advice of well meaning social workers and Medicaid workers.  You cannot even rely on the advice of an attorney unless he or she is an expert in Medicaid Planning.  If you find an attorney who specializes in Medicaid Planning, before you hire him, ask him how many Medicaid Planning cases he has handled.  If it is less than a dozen cases, be careful.  If you were having brain surgery, you would not want to be the first patient on whom the surgeon is operating.

            Some people in nursing homes are paying thousands of dollars a month, waiting until they run out of money, when they can qualify for Medicaid.  This is a sad and unnecessary loss of money.  In most cases, some money can be saved by proper Medicaid Planning.  In some cases, 100% of the money can be saved!  It is true that the Medicaid laws are becoming stricter as the years go by. However, there is still room for creative Medicaid Planning.   

© OKURA & ASSOCIATES, 2009           

Sanford K. Okura received his Doctor of Jurisprudence Degree from Stanford University in 1976.  He specializes in Estate Planning and Medicaid Planning to protect assets from nursing home costs, probate and estate taxes.

This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)

This column is for general information only.  The facts of your case may change the advice given.  Do not rely on the information in this column without consulting an estate planning specialist.