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Asset Protection Strategies for Medicaid Eligibility

July 2, 2024
Learn how to protect assets and become eligible for Medicaid with practical strategies, while avoiding questionable methods.

What Is Long-Term Care?

Long-term care includes a variety of services needed by those who can't do everyday activities because of health problems or disabilities. Long-term care helps with daily tasks like bathing, eating, and moving around. It's provided through nursing homes, assisted living and home health aides.

Why Worry about Paying for Long-Term Care?

The cost of long-term care can be huge. For instance, according to "Genworth’s Cost of Care Calculator," the average cost of staying in a semi-private nursing home can cost about $104,000 a year! That's a lot of money and can use up your savings quickly. To handle these costs, people may consider using their money to buy insurance, Medicare, or Medicaid. However, Medicaid is special because it's meant to help people who don't have a lot of money or assets, and Medicare does not pay for long-term care expenses.

How Can Medicaid Help?

Medicaid, a joint state and federal program, provides health coverage to low-income individuals of all ages. In some places, it might even pay for your stay in a nursing home for as long as you need it. To become eligible for Medicaid, you need to prove you don't have more than a certain amount of assets and income, which varies by state and the type of Medicaid coverage sought.

What If You Have Too Many Assets to Be Eligible for Medicaid?

If you have more savings or assets than Medicaid allows, you might think qualifying for these benefits is impossible. However, a qualified elder law firm can provide strategies to become eligible for Medicaid.

Questionable Ways to Qualify for Medicaid

You may have heard from a friend, neighbor, or the nursing home staff that two options for meeting Medicaid’s asset limits are to spend down or gift your assets. Both methods create more problems in the long run.

If you use your own money to pay for long-term care – or gift or give away your nest egg – until you reach the required Medicaid asset limit, you may have nothing left over to care for your spouse or pass on to your loved ones. In addition, when you apply for coverage, Medicaid looks at gifts you made in the last five years. If you gave away money or property during this time, you might have to wait a bit before getting help from Medicaid.

How Do You Keep Your Assets Safe and Still Be Eligible for Medicaid?

SmartAsset’s article, 3 Ways to Protect Assets from Medicaid,” recommends three strategies for qualifying for Medicaid coverage. Each method below is complicated, and thus, seeking the guidance of a qualified estate or elder law attorney or a financial advisor is essential.

Medicaid Asset Protection Trust

You can put your extra assets into a special trust that Medicaid can't touch. A Medicaid Asset Protection Trust is an irrevocable trust established during your lifetime that transfers ownership of assets to a trust, so Medicaid excludes them from the resource limit during eligibility qualification.

Life Estate

This is a way to share your real estate ownership with someone else (like your spouse), so that when you pass away, they get it directly. This can help keep your home out of Medicaid's asset count.

Medicaid Annuity

An annuity is a financial product that gives you income over time. Some annuities are set up to match Medicaid rules, so buying one might help you qualify for Medicaid sooner.

Ready for the Next Step?

Planning for anticipated long-term care expenses is critical, especially because of Medicaid's five-year look-back period. The earlier you start thinking about asset protection for Medicaid eligibility, the more choices you'll have for protecting your savings and getting the care you might need in the future. An accomplished elder lawyer can offer planning strategies to help protect assets for your spouse and loved ones.

Key Takeaways

  • Long-term care is for those who can't do everyday tasks due to health issues.
  • Medicaid helps cover long-term care for people with limited assets and income.
  • Strategies like trusts, life estates and Medicaid annuities can help protect assets, while meeting Medicaid eligibility.
  • Planning is crucial, especially because of the Medicaid five-year look-back period.
  • A qualified elder lawyer can help create a personalized asset protection plan for Medicaid eligibility.

Reference: SmartAsset (Feb 16, 2023) 3 Ways to Protect Assets from Medicaid

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