Medicaid planning is legal planning that takes advantage of Title XIX of the Social Security Act, "Medicaid." The Medicaid title is long and has many provisions for many sorts of things. But, when in the context of Elder Law, it refers to the state and federal government programs that will pay for your long term care.
It is distinct from Medicare, which provides health care and prescription benefits for seniors. To help think of how the two are different, compare Medicaid and Medicare to a long term care policy and a health insurance policy, respectively. Medicare covers immediate medical needs, like a trip to the emergency room, but Medicaid covers longer-term needs, like long term nursing home care.
To qualify for Medicaid assistance, you are only allowed to own certain things - and that's where Medicaid planning comes in.
How does Medicaid planning work?
Essentially, to qualify, Medicaid has a whole list of rules and a list of things you can and cannot have. Medicaid planning works by taking things you have, but aren't allowed to have, and turning them into things that you can have.
Of course, there are also rules about how you can and cannot change things. For example, you're only allowed to have a certain amount in cash and bank accounts. You cannot simply give your money away to get under this limit; that gift would be a 'divestment' because you could have spent that money on your own care. If you 'divest,' you will be disqualified from the Medicaid program for a period of time.
Some Medicaid planning strategies focus on transferring money to your loved ones without divesting. There are many strict rules you need to follow to pull this off effectively.
That's why you should visit an elder law attorney and Medicaid planning expert if you want to take advantage of all of your legal rights. Certain strategies are more aggressive and risky while others are conservative and accepted. A good attorney can advise you about all different kinds of strategies and pick some that will work best for you. Be wary of the 'one size fits all' Medicaid planning offered by certain groups - those rarely are the most effective or appropriate for your needs.