For many families, the high cost of long-term care comes as a shock. With the national average for a nursing home room exceeding $8,500 per month (Genworth Cost of Care Survey, 2023), even well-prepared clients can see their life savings vanish in a matter of months. That’s where Medicaid planning steps in as both a safety net and a vital part of comprehensive estate planning.
But here’s the catch: Medicaid planning is full of landmines. One wrong move can delay eligibility, trigger penalties, or even result in a denial that leaves families scrambling to cover care costs. As an estate planning or elder law attorney, your guidance is crucial to steering clients away from these common errors.
Below are the top five Medicaid planning mistakes attorneys should help their clients avoid, along with strategies to get it right.
1. Relying on Outright Gifts to Family Members
Many clients assume that simply giving assets to children or grandchildren will solve their eligibility issues. On the surface, it seems logical: move assets out of the estate, and Medicaid can’t count them.
The problem? Medicaid’s five-year lookback period. Any transfers made within five years of applying can trigger penalties that delay eligibility. Worse, outright gifts expose assets to the creditors, lawsuits, or divorces of the recipients.
Better Approach:
Use tools like an Irrevocable Pure Grantor Trust (iPug®) instead. This allows clients to protect assets, maintain some level of control, and avoid the risks that come with outright gifting. Trust-based strategies also prevent the unpredictability of a child’s financial situation from jeopardizing the family’s security.
2. Waiting Too Long to Start Planning
A common mistake is waiting until a client is already in a nursing home—or on the verge of needing one—before considering Medicaid planning. At that point, options are limited, and families often face a spend-down that could have been avoided.
Better Approach:
Encourage early, proactive planning. By starting well before the need for long-term care arises, attorneys can help clients protect significantly more assets. Even when planning starts late, tools like Medicaid-compliant annuities or promissory notes can still preserve resources—but the earlier the planning begins, the greater the protection.
3. Misunderstanding Medicaid Eligibility Rules
Medicaid eligibility is notoriously complex, and rules vary by state. Clients often misunderstand which assets “count” and which are exempt. Retirement accounts, primary residences, and spousal allowances can all be treated differently depending on the jurisdiction.
Better Approach:
Attorneys should use state-specific tools and software to ensure accuracy. For example, LWP’s STEPS™ software automates Medicaid calculations, identifies protected assets, and clarifies penalty periods—removing guesswork and reducing costly errors. Staying current with state regulations is non-negotiable.
4. Submitting Incomplete or Incorrect Applications
The Medicaid application process is paperwork-heavy, and missing even one document can lead to delays or outright denial. Common missteps include misreporting income, failing to provide proof of asset transfers, or missing deadlines for supplemental requests.
Better Approach:
Implement a systematic application process. Checklists, templates, and dedicated intake systems ensure nothing is overlooked. Attorneys can also educate clients on the importance of keeping organized records well in advance of applying.
5. Overlooking Ongoing Compliance and Recertification
Many attorneys focus only on the initial Medicaid application, but annual recertification is just as critical. Clients who fail to update their information or who inadvertently exceed income or asset limits risk losing their benefits.
Better Approach:
Build recertification support into your workflow. Attorneys can schedule proactive check-ins, use client status dashboards, and provide ongoing guidance to ensure compliance. This not only prevents lapses in eligibility but also strengthens client relationships over time.
How Attorneys Can Get It Right
Avoiding these mistakes requires more than legal knowledge—it requires systems, processes, and the right tools. Firms that excel in Medicaid planning tend to have:
- Documented workflows for intake, eligibility review, and application prep
- Centralized task tracking so nothing falls through the cracks
- State-specific software, like LWP’s STEPS™, that removes guesswork from eligibility calculations
- Education materials (like the Asset Protection Analysis Letter) that help clients understand the “why” behind the strategy
By pairing strong technical knowledge with proven workflows, attorneys can deliver consistent results while reducing stress on their team.
Final Takeaway
Medicaid planning is one of the most impactful services estate planning attorneys can provide—but it’s also one of the easiest areas for clients to make costly mistakes. By helping families avoid outright gifting, delayed planning, eligibility missteps, incomplete applications, and recertification pitfalls, you can safeguard both their care and their legacy.
With the right guidance—and the right tools—your firm can become the trusted partner clients turn to when navigating the uncertainty of long-term care.
👉 Want to see how LWP’s STEPS™ software helps attorneys streamline Medicaid planning and protect more assets? Schedule a discovery call with our team today.
