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Medicaid crisis plans: When are they needed most?

In the best of circumstances, Colorado residents will have set up a financial plan that protects their assets if it becomes necessary for them to enter into a long-term care facility. When a viable financial strategy is in place, well in advance of the need, individuals can pay for their long-term care with Medicaid benefits rather than depleting their personal assets.

Such a long-term care strategy must be in place at least five years before the long-term care expenses begin to accrue -- otherwise the Medicaid five-year look-back period will prevent them from qualifying for Medicaid. In these circumstances, it's necessary to create what's called a "Medicaid crisis plan."

What is the Medicaid five-year look-back period?

The Medicaid five-year look-back period prevents individuals with personal financial wealth from immediately transferring their money into a trust to safeguard it from being depleted by medical expenses in the event of a medical emergency. Essentially, Medicaid benefits will not go into effect until a patient exhibits a real financial need.

If it's clear that the patient possessed substantial assets and transferred them to someone else's ownership -- or to the ownership of a trust -- for the purpose of lowering his or her overall net worth, the Medicaid five-year look-back period will disqualify the patient for benefits. However, individuals facing circumstances like this will not be entirely without options.

What's a Medicaid crisis plan?

A Medicaid crisis plan is the last line of defense for your personal assets if an emergency medical crisis requires you to receive expensive long-term medical care. A well-written Medicaid crisis plan can help you qualify for Medicaid coverage through the use of various loans and gifts. Medicaid crisis plans can help you meet federal guidelines to save a substantial percentage of your personal assets.

A Medicaid crisis plan will not save your assets from depletion the way other estate planning strategies can when they're prepared in advance. However, your crisis plan will serve as an excellent strategy to safeguard at least part of your personal wealth in the event of an emergency. If you think you and your family could benefit from a Medicaid crisis plan, make sure to investigate this important estate planning strategy more.

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