Sheltering Your Assets to Qualify for Medicaid
by Procino-Wells & Woodland, LLC
By: Kyle Massey
Medicaid enrollment is something none of us like to think about. But, like all aspects of elder care, it’s something best approached head-on and well in advance. Careful planning ahead of time can save us and our loved ones from untold stress and worry, to say nothing of the unnecessary financial burden, should we become seriously ill, disabled or require long-term care.
We’re all aware that Medicaid is a joint federal/state program for “poor” Americans who are elderly, disabled or blind. But did you know that Medicaid is the nation’s single largest payer of nursing home bills? Even if you don’t feel you fit the classic definition of “poor,” the expenses of long-term care can still place an enormous strain on your finances.
One of the more common misconceptions about Medicaid is that a person cannot have more than $2,000 in assets to be eligible to enroll in Medicaid. Many people find themselves spending up or giving away their life’s savings in order to fall below this threshold—in other words, to become suitably destitute as to qualify for Medicaid. This is simply not true. In fact, it isn’t generally recommended, because Medicaid has a “look-back period” of 60 months. This means that, barring certain specific types of transactions, the assets may still be considered yours for 5 years after you get rid of them, either as gifts or as transfers of property for less than fair market value (i.e., selling your house to your son or daughter for a dollar). It’s possible to find yourself broke and still not eligible for Medicaid for quite some time—obviously not a good position to be in. Likewise, the idea that you can put all your assets in your spouse’s name in order to qualify is a myth, as Medicaid generally considers all of a couple’s assets regardless of how they are titled.
There is absolutely no reason to spend all the money you’ve worked for during the course of your life on long-term care, however. There are some safe, legal, and ethical steps you can take now to protect your assets. An attorney experienced in elder law can help you rearrange your finances in such a way that you can qualify for Medicaid, yet still preserve your assets for your family.
One way to do this is to convert so-called “countable assets” into non-countable assets, which are off-limits. For example, Medicaid doesn’t count items such as your primary residence (i.e. your family home), one vehicle, prepaid burial plots, and term life insurance. By paying off the mortgage or making improvements or repairs on your home, or purchasing a new vehicle, your countable assets (money) become exempt (house, car).
Another method of sheltering your assets is to use a trust. The main difference between a trust and a will is that a trust goes into effect as soon as you create it, whereas a will only becomes effective after death. If done properly, putting your money or property into a trust can effectively take it out of play and preserve it for your loved ones. There are several types of trusts, each with their own advantages and disadvantages.
Two points that can’t be overemphasized: First, by using any of these methods, you are entirely within your rights. You aren’t hiding assets from the government, which is illegal and which no reputable lawyer would advise or assist you to do. Instead, you are only taking advantage of the provisions in your state’s Medicaid laws. Some people resist this type of planning because they feel it’s “gaming the system.” It’s not. Just like the tax deductions you’ve been taking all your life, these exemptions were created with the full intent that average people would make use of them. By doing so, you are not only making a wise decision about your own future and that of your family, but also an ethical one. You have to look out for yourself and your loved ones.
It’s just as important to note that Medicaid planning is not a swamp you should try and navigate by yourself. Although Medicaid is a federal program, some of its finer points vary from state to state, as well as from one person to the next. What works for your cousin, your neighbor or the guy next to you at the diner may not work for you. These people may not even know what they’re talking about anyway. We strongly recommend you consult with an experienced elder-law attorney. A lawyer can help you figure out which tactics are best suited for your particular situation and make sure that everything is done correctly. The sooner the better: you want to have all these measures in place well before you need to enroll in Medicaid and/or move to a long-term care facility. But even if you’re already in a nursing home, there may still be some options open to you.
We’ve all heard Medicaid horror stories from our family and friends. If we start planning early, we can avoid becoming the next one, while protecting our assets and preserving a legacy for our loved ones.