New Year, Same Myths: 3 Things People Still Get Wrong About Medicaid Planning

Medicaid planning is one of the most misunderstood areas of elder law. Even highly educated families often come in with assumptions that sound reasonable, but turn out to be incorrect, which could end up being costly. As we head into a new year, it’s worth clearing up a few persistent myths.

Myth #1: “Medicaid Is Only for People with No Assets”

This is the most common misconception, and one of the most damaging. Medicaid is income- and asset-tested, but it is not limited to people who are poor. Many middle-income families qualify, but only after careful planning. In fact, Medicaid long-term care rules are specifically designed for people who do have assets like homes, retirement accounts, and modest savings.

The real question is not whether you have assets, but how they are owned, spent, or protected under Medicaid rules.

Myth #2: “The Nursing Home Takes the House”

Nursing homes don’t take houses. Medicaid doesn’t “take” houses either. But here’s the truth people miss:

• The home may be exempt during lifetime, depending on whether the person is married or single, or has some other qualifying exemption such as a caregiver child, disabled child, or sibling with an equity interest in the home.
• It may still be subject to estate recovery after death. This is state-specific.
• Transfers made at the wrong time can trigger penalty periods for the house.

Without proper planning, families often discover too late that the house must be sold to repay Medicaid benefits. With proper planning, the outcome can be very different.

Myth #3: “I’ll Just Give Everything to My Kids”

Gifting assets – especially a home – without understanding Medicaid’s five-year lookback is a recipe for disaster. Unplanned transfers can result in months (or years) of ineligibility for benefits at exactly the moment care is needed most. Families are then forced to privately pay during the penalty period, often at devastating cost.

Further, not understanding the other considerations of transferring property to children, such as tax liability, basis adjustments, gifting limits, and asset protection can result in unintended consequences. Strategic planning may involve trusts, spend-down strategies, or timing decisions, but rarely impulsive gifting.

Medicaid planning is not about “beating the system.” It’s about navigating a complex set of rules designed to balance care access with financial responsibility. The families who fare best are the ones who plan earlier rather than later, with accurate information and no internet myths. Professional guidance tailored to your state’s rules is essential to make the best estate planning decisions for your family, based on your goals.

A new year doesn’t magically change Medicaid rules, but it is a perfect time to replace outdated assumptions with clarity. If your long-term care plan is based on something you “heard once,” now is the time to verify it. In Medicaid planning, what you don’t know really can hurt you.