When Medicaid planning, many practitioners focus on the look back date and the penalty period to identify the best strategy to ensure Medicaid eligibility in the shortest period of time. While that may be true for crisis planning, when preplanning for Medicaid benefits, the look forward period and the breakeven date are critical factors to become eligible in the shortest period of time.
When pre‑planning, practitioners must strategize on two premises; (1) what the worst case scenario would be (if the client fell ill the day after pre‑planning is completed) and compare that to (2) the best case scenario, which occurs when the client stays healthy for 60 months. While crisis practitioners focus on the look back date and review of financial records for the previous 60 months, pre‑planning practitioners must focus on the date of a conveyance (uncompensated transfer) and "look forward" 60 months to determine the timeframe in which the the transfer will be in the purview of a future Medicaid application. Understanding the distinction between the look-back period and the look forward period is critical in determining the breakeven date when preplanning for future Medicaid benefits.
So, what is the breakeven date? It is the date, when pre-planning, that if it is reached, it will be better to wait out the 60 months from the original conveyance date than to convert to a crisis case. The breakeven date is calculated by determining the worst case scenario and comparing it to the best case scenario. The worst case scenario is if the client fell ill the day after pre‑planning was completed. What would be the best case scenario in such an event? To determine that, you would calculate as if it were a crisis case, and determine the "minimum months to qualify", the soonest period in which you would be able to get the client eligible for Medicaid if they came in in crisis. Once you have calculated the minimum months to qualify, and then compare it to the best case scenario, if the client had stayed healthy for sixty months. The breakeven point is simply the best case minus the worst case. Restated the best case is remaining healthy 60 months (the entire look forward period) and the worst case is if it were a crisis case and you calculate the minimum months to qualify.
Let's give an example. Assume a client came into you in crisis and after doing your calculations you are able to determine that you can get them qualified for Medicaid in 23 months. This is done by transferring assets and reserving enough assets to pay through the 23 month ineligibility period. It's pretty straightforward in a crisis case. Assume now the same exact client came in, but was healthy. In preplanning case you would calculate what would happen if the client were in crisis (like we just presumed) and then compare it to the best case scenario (they stay healthy 60 months). In this pre‑planning case the breakeven date would be 37 months (60 minus the minimum months to qualify of 23 months) from when the preplanning was completed.
Therefore in a pre‑planning case if the need for nursing home care occurred within 37 months, you would convert the pre‑planning case to a crisis case at that time and get them qualified in 23 months. If however, the client's need for nursing home care occurred after month 37 (the breakeven point), then instead of converting to a crisis case, you would privately pay until the 60th month after the original transfer (look forward date). Sounds confusing, but it's really quite simple once you understand these new terms.
To learn about these key terms join our FREE Webinar February 24th on Simplifying Medicaid Eligibility & & Qualified Transfers.
Here's just some of what you'll discover…
- Understanding the 12 Key terms of Medicaid
- Learn the Qualification Standards: Does Client Meet Needs Tests?
- Learn the Medicaid Terms of Art
- Learn the Snap Shot, Look Back/Look Forward Distinction: And how to put it all together
- At the end of the event receive an ALL STATES Medicaid Planning Resource Guide
- …and much, much more!
Just click here to register to reserve your seat… it's 100% FREE!
And you can learn how the LWP-CCS™ Medicaid software can calculate both crisis and preplanning strategies optimal to every client fact pattern: and simplify this otherwise confusing planning opportunity!
David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center
