Our law allows
qualified individuals to seek governmental assistance in paying for long-term
care, and it provides opportunities for individuals to plan ahead and take
appropriate steps to meet those qualifications.
Some people are understandably squeamish when it comes to planning for
possible qualification for what is often regarded as a “welfare” benefit. In fact, there was a time when the Medicaid
laws prohibited people from planning for Medicaid qualification (the so-called
“Granny Goes to Jail” law). The Medicaid
laws also prohibited people from advising others about how to qualify for
Medicaid (the so-called “Granny’s Lawyer Goes to Jail” law). It turns out that nobody went to jail under
these laws.
The U.S.
Attorney General declined to prosecute forward-thinking Grannies, and the
Federal courts moved quickly to determine that banning lawyers from advising
their clients about Medicaid qualification violates the First Amendment to the
U.S. Constitution, which guarantees freedom of speech. These decisions make a great deal of sense,
especially in light of how we, as taxpayers and citizens, interact with our
government in other contexts.
For example,
everyone knows that it is immoral and illegal to cheat on your income
taxes. But does that mean that any of us
has an obligation to pay more taxes than the law requires? Of course not. The Internal Revenue Code allows us to take
various kinds of deductions when we file our annual income tax returns. As long as we deduct no more than the law
allows, we are engaging in the noble practice of tax avoidance. However, if
someone knowingly takes a tax deduction in an amount or of a kind that the
person is not entitled to take, the terminology changes to tax evasion.
For tax avoidance, a person is praised, for tax evasion, a person can be
imprisoned.
In the 1916 U.S.
Supreme Court case of Bullen v. Wisconsin,
reported at 240 U.S. 625, Justice Oliver Wendell Holmes wrote that “when the
law draws a line, a case is on one side of it or the other, and if on the safe
side is none the worse legally that a party has availed himself to the full of
what the law permits. When an act is
condemned as an evasion, what is meant is that it is on the wrong side of the
line.” Taking economic advantage of what
our law allows—staying on the “safe” side of the line—is both legal and moral.
Justice Louis
Brandeis, whose tenure on the U.S. Supreme Court overlapped that of Justice
Holmes, famously stated this same principle another way:
I live in
Alexandria, Virginia. Near the Supreme
Court chambers is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get
home early. However, I usually drive
outside the downtown section of the city and cross the Potomac on a free
bridge. If I went over the toll bridge
and through the barrier without paying the toll, I would be committing tax
evasion. If, however, I drive the extra
mile and drive outside the city of Washington to the free bridge, I am using a
legitimate, logical and suitable method of tax avoidance. For my tax evasion, I should be
punished. For my tax avoidance, I should
be commended. The tragedy of life today
is that so few people know that the free bridge even exists.
Knowing the alternatives that are
available to you is the essence of wise planning. You cannot make a choice that you do not know
you have.
The
rules that govern Medicaid qualification are fairly clear-cut, but they allow
for planning opportunities that are not all that obvious. For some of us, learning about what those
opportunities are can make the difference between leaving a modest inheritance
to your children and leaving them with nothing.
As long as you follow the Medicaid rules, you can ethically, morally,
and legally make a significant difference in your children’s financial future
by leaving them what the law allows. So
if paying for long-term care is an issue for your family, learn all you can
about Medicaid qualification so you can plan your and family’s financial future
wisely.