The following are a few mistakes commonly made in Medicaid Planning (in no particular order):

1. Transferring assets without taking into account the transfer rules and penalties.

2. Confusing the look-back period and the transfer penalty period.

3. Transferring the homestead to the children directly by way of a quitclaim deed - or other poor planning with the homestead - in an attempt to preserve the home from Medicaid claims or liens.

4. Failing to plan for the event BOTH spouses enter a skilled nursing facility.

5. Failing to plan for the event the Well-Spouse predeceases the Nursing-Home-Spouse.

6. Making transfers without the proper authority or documentation.

7. Relying on outdated or poorly drafted durable powers of attorney (or other estate planning documents).

8. Neglecting to disclose all known income, assets or gifts - and neglecting to inform Medicaid of any new or additional income, assets or gifts in the future.

9. Failing to include the gross income of an applicant when applying for benefits.

10. Improper establishment and/or maintenance of a Qualified Income Trust (QIT).

11. Failing to determine whether or not a nursing home accepts Medicaid payments.

12. Believing that MEDICARE pays for long-term nursing home costs.

13. Making transfers into and out of the wrong type(s) of trusts.

14. Thinking the $11,000 gift tax exclusion is applicable to Medicaid planning.

Consider this hypothetical: Five years ago, Mary, a widow, prepares a revocable living trust, placing all of her assets into this trust. Mary is the sole beneficiary during her own lifetime. She names herself as trustee during her lifetime and legal capacity, and her daughter Susan as Successor Trustee, in the event of death or legal incapacity.

Mary subsequently develops alzheimers and other sever disabilities that render her legally incapacitated and requiring skilled nursing facility care. Her daughter, Susan, seeks to apply for Medicaid benefits for Mary in order to pay for the high costs of the skilled nursing facility. On the application Susan leaves off the assets of the trust, believing that the trust protects those assets from being attached by Medicaid. Is she correct?

No. This is a common mistake and assumption we see. A Revocable Living Trust, by itself, does nothing to protect assets from Medicaid claims or liens. In fact, the trust will be considered an available resource and must be spent down before Mary will be eligible for Medicaid benefits. For example, if the trust contained $60,000 in assets, this amount must be spent down to less than $2,000 (assuming no other assets) before Medicaid will step in.