Could the Draconian New Medicaid Rules for Long-Term Care in Illinois (effective Jan. 1, 2012) Really Be A Cloud With A Silver Lining?
New Rules As you may have read in recent columns, Illinois has adopted new rules for Medicaid coverage for long-term care for our citizens and the state of Illinois (“DRA”). These new rules took effect January 1, 2012. The new rules are going to require that our clients engage in what we call “Five-Year Planning.” This “Five-Year Planning” has become necessary because of the fact that there will be a new five-year lookback for all Medicaid applicants when there are asset transfers that take place after January 1, 2012. The Silver Lining What may come as a surprise to many of our clients is that the unintended consequences of these rules may be that long-term care planning for our clients may actually be enhanced in some ways. The silver lining in all of this is that while the lookback period and the need to plan further in advance is one of the negative aspects of the new law, the need to use trusts of a very specialized type in order to comply with the five-year look back may actually provide some very positive consequences. How to take advantage of the New Rule Following is an example of how the new rules could work in your favor. Instead of leaving assets for their children outright, parents can now consider leaving assets in trust for their children. Leaving assets in trust for children carries with it the following benefits:
- the ability to protect the assets inherited by a child from the creditors and predators of the child, such as divorcing spouses, business creditors, tort creditors, etc.;
- the ability to allow the management of the assets to continue under the supervision of the parents’ financial advisor who may have assisted the parents over the years in accumulating a critical mass of assets that can provide for many years of security for the children;
- the ability to meet the five-year lookback requirement of the new Medicaid laws;
- and, finally, the ability to prevent the children from squandering or losing the assets that the parents carefully accumulated during their lifetime.