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There was a time when I knew nothing about Medicaid Planning. Nada. Zip. Zilch.

I remember asking the person who said he did Medicaid Planning a very basic question: “How do you make any money helping poor people get health insurance?”

That question betrayed my lack of understanding of how Medicaid is more than just a health insurance program for the poor, it is a financial backstop for the elderly in need of long-term care services. The LTC Medicaid side of the coin is a complex set of rules about what assets are exempt, what can and can’t be given away and to whom it can and can’t be given. In order to qualify, an applicant must have typically spent down most of their life savings.

But if you don’t know or understand any of this, a few things can happen. The first is very obvious. If you are advising someone who is in need of long-term care and does not have adequate insurance, failing to understand their options can lead to giving poor advice. More legal and financial advisors give BAD advice in the area of the long-term care spenddown than there are advisors giving GOOD advice. Most of that comes from a simple lack of understanding, which can be easily fixed.

The second negative impact on advisors working with elderly clients is the risk of a lawsuit. With the number of people needing advice concerning the long-term care spenddown, there is a growing volume of legal and financial advisors giving poor advice, often leading to Medicaid ineligibility periods (also known as penalty periods) or a dramatic and fully preventable loss in assets. This proliferation of bad advice has created a growing field of litigation: LTC Medicaid eligibility malpractice.

Every legal or financial advisor who works with seniors exposes themselves to LTC Medicaid eligibility malpractice from failing to understand how the advice that they give impacts or hinders Medicaid eligibility. Bad advice can have negative consequences. If those consequences cause the person receiving advice to be adversely affected, the legal or financial advisor can be sued and held accountable for the damage they caused.

This damage can manifest itself in one of two ways.

The first is for someone to be ineligible for Medicaid when they would have been eligible or become eligible sooner, but for the advisor’s bad advice. A good example of this is when a financial advisor tells a client who inquires about gifting that they can gift up to $15,000 per year per person.

In a recent case I saw this happen where the advisor had dispensed this advice but failed to mention that the gift limit, he was referring to was for the gift tax only and did not apply for Medicaid. The client had gifted over $80,000 within the last two years before having a stroke and going in the nursing home. Her family filed her Medicaid application thinking those gifts were exempt from the lookback, only to have Medicaid penalize the applicant for a full year of ineligibility.

The second way to incur liability in this area and cause damage is to give advice that causes a patient to spend more money on the cost of care that the law requires. Under the current Medicaid rules, you can actually easily overspend your assets on the cost of care. Most legal and financial advisors do not understand the asset limits, how they are different for single or married applicants, and how to calculate the resource limit.

Over the next decade, you will hear countless stories of legal and financial advisors who were successfully sued because they did not understand how their advice conflicted with LTC Medicaid eligibility and spenddown rules. Don’t let one of those stories be about you!

Our whole Medicaid Planning support program is developed around the idea of helping people with scant knowledge of long-term care and the Medicaid spenddown system become knowledgeable advisors. Even if you don’t intend to do Medicaid Planning full time, a good understanding of LTC Medicaid and allowable asset protection techniques under the rules can be very helpful.

When I started out, I didn’t understand much and had to spend years piecing it together. That’s why I created our training system that provides continuing legal education and professional education to help raise awareness, the largest textbook on the subject ever written, and direct practice mentoring and support for legal and financial advisors. It’s like putting Miracle Grow on your Medicaid Planning practice and is the best prophylactic against getting sued for lack of knowledge ever developed.

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