60 Months Has Nothing To Do With Anything In Medicaid Planning
So many attorneys and clients get hung up on the 60‑month look-back period when considering Medicaid planning. Many clients believe they have to wait 60 months to qualify for Medicaid if they give assets away. There is no such rule. 60 months is merely the look-back period. 60 months represents the period of time Medicaid can look back at your financial records; it has nothing to do with how long you’re ineligible. On the flip side, many lawyers believe 60 months is the number of months they have to wait if they do a pre-plan to ensure that it works. That too is a fallacy, as the number of months essential in a pre‑planning case is the “break-even” number of months, not 60. So what is the break-even? This is the most fundamental concept in Medicaid planning.
We know that in any Medicaid crisis plan, if the client comes in we can get that client qualified in a certain period of time. At LWP we call this “minimum months to qualify.” Understanding that in a crisis case the minimum months to qualify is the “worst case scenario,” we then need to look at the best-case scenario, which would be the client staying healthy for 60 months. Therefore, the break-even is the best case minus the worst case.
For example, recently I did a pre-planning case for a client who, had it been a crisis, I would have been able to qualify in 22 months. This was a client with over $800,000 in assets, and in crisis we would have been able to save over $700,000 of it. But understanding that the client is not in crisis means we are doing the same exact plan and then waiting for medical needs to occur. If the medical need occurs before the break-even point, then we would convert to a crisis plan. If the medical need occurs after the break-even point, we would keep the original pre-plan in place without modification.
So what is this break-even point? In my fact pattern it’s 38 months: 60 months (best case) minus 22 months (worst case). In this fact pattern, if my client goes into a nursing home before month 38, all I would need to do to my pre-planning case is “flip the switch” and convert it to a crisis plan to get him qualified in 22 months. If the client stayed healthy after the break-even, then I would do nothing and let the plan play out as originally structured and the client would be eligible in the timeframe identified. So, next time someone tells you about 60 months, shake your head and say “What? Don’t you know the break-even?”
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David J. Zumpan0, Esq, CPA, Co-founder Lawyers With Purpose, Founder of MPS, Founder and Senior Partner of Estate Planning Law Center.Posted by dzumpano | 0 comments