When older adults reach retirement age, they automatically qualify for Medicare in most cases. Medicare is a critical social support that ensures that retired adults have access to high-quality medical care without substantial out-of-pocket costs or the need to pay a high insurance premium on a fixed income.

Sadly, there are major gaps in what Medicare covers. Older adults who need intensive medical care, like skilled nursing assistants in their home or residence in a nursing home, may find that Medicare won’t cover their costs. Instead, they will be dependent on their own resources or on Medicaid.

Medicaid limits income and assets

If an older adult eventually requires Medicaid benefits, the government will likely require that they liquidate most, if not all, of their assets prior to receiving Medicaid. However, Medicaid stops short of forcing people to refinance or sell their homes while they depend on the property. That stance changes once someone dies.

Medicaid and state-run Medicaid insurance programs will often take aggressive steps to recoup benefits paid to now-deceased beneficiaries. They may place a lien against the beneficiary’s home and seize it from the estate if the family members or heirs of the beneficiary aren’t able to repay the full value of the benefits received.

While there are exceptions to this rule, including scenarios where a caregiver lives with an aging parent prior to their moving into a nursing home or where the family members surviving the beneficiary experience financial hardship, receiving approval for these sorts of exceptions can be difficult. It is often better to take steps to protect the family home before you ever need to qualify for Medicaid benefits.

Medicaid planning is a form of asset protection planning

Older adults, especially those who want to leave something behind for their children, grandchildren and other loved ones, will likely find that proper planning can help them access benefits that they need without destroying their legacy.

Strategies are tailored to people’s needs, although the use of strategic gifts and the creation of a trust are often critical to Medicaid planning. The sooner you start this process, the sooner you could potentially qualify for Medicaid when you need it without losing all of your resources first.