How Can You Protect Your Assets From Medicaid


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How to Qualify for Medicaid and Protect your Assets

If you want to protect assets from nursing home costs, don’t wait to take action because of that Medicaid look-back period. In addition, the documentation required for spending during that period means you will need to keep bank records and receipts for large expenses, including financial gifts. My mom wasn’t wealthy, but she was informed, and she had all the paperwork waiting for me.

Finally, be certain to consult an elder law or estate planning attorney. They will help you understand the best options and strategies for your life stage and assets.

Ohio Medicaid Planning Attorneys For Alzheimers Stroke Or Long Term Medical Conditions

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  • The process of Medicaid planning and the structuring of your home and assets
  • Short and Long Term Estate Planning to Ensure Maximized Tax Advantages and Medicaid Eligibility
  • Important Financial and Health Care Powers of Attorney, and authority to manage property and asset decisions
  • How the improper gifting of money and assets to children can adversely affect your qualification for Medicaid
  • How you might be able to qualify for Medicaid without a “spend down”
  • The difference between Medicaid and Medicare benefits
  • Strategies for paying for assisted living or a nursing home as symptoms advance

What is Medicaid Spend Down?Contact an Experienced Medicaid Planning Attorney for Alzheimers, Stroke, and Long Term Health Care

How Can I Protect My Home And Assets From Nursing Home Expenses

This is an actual question I encountered. To protect privacy Iâll omit any names and change the facts just slightly. The questioner was 67 years old and in fairly good health. Their Florida home was worth $500,000, with approximately $200,000 owed on the mortgage.

I’ll start by mentioning that this is likely the number one concern of all people who consult with me about an elder law or Medicaid planning issue. People come to me concerned about their parent or spouse, who has recently had stroke or other health malady that now requires them to be in a skilled nursing facility. When they realize that Medicare does not have a significant long-term care benefit, it is daunting to find out that long-term care can costs six figures a year. Many people then naturally ask: how am I going to be able to afford this nursing home?

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Why Choose A Medicaid Asset Protection Trust

In addition to shielding assets from Medicaid and preserving them for your family, a MAPT has a number of advantages.

Some of these advantages are easy to see when the MAPT is compared to other ways people often try to protect assets from Medicaid. For instance, in order to preserve a family home, parents often transfer the deed to the home to an adult child. However, this is not always an effective choice, and can have disastrous consequences.

Protecting Assets from Dissipation or Children’s Creditors or Divorce

Let’s say you have a home worth $250,000 and you transfer it to your adult daughter. Two years later, you need to enter a nursing home, and one year after that, your funds run out. You will not qualify for Medicaid because Medicaid will “look back,” see the transfer, and treat you as if you still possessed that $250,000 asset.

Furthermore, because the house is now in your daughter’s name, it’s also legally hers. That means that if she gets a divorce, her spouse may be awarded part of the value of the house. Or if she has creditors, they can legally treat the house as her asset in their efforts to seek repayment of her debts. If your daughter were so inclined, she could also mortgage the house if it were in here name.

If your child lives with you and provides care, you may be able to transfer the home under the Child Caregiver Exception ask your attorney to compare this option to the use of a MAPT.

Tax Benefits of MAPT versus Life Estate

Revocable Vs Irrevocable Trusts

Medicaid Trust for Asset Protection from Nursing Home Costs

The trick is to turn your countable assets into non-countable assets. Some people look to trusts as a way to accomplish this goal. Unfortunately, not all trusts are created equal. You need to understand the difference between a revocable and an irrevocable trust.

A revocable trust is one where you still have access to your assets and still retain control to change or cancel provisions of the trust. Medicaid will see this kind of trust as a countable asset.

An irrevocable trust, on the other hand, is one where someone else, a designated trustee, takes the reins. You cannot touch the assets or amend provisions for the trust in any way.

The trustee is not required to distribute any assets to you, even for the purposes of health care. The day your assets are transferred into an irrevocable trust, they become non-countable for Medicaid purposes.

Unfortunately, those assets are seen as a gift and are subject to the Medicaid look-back period. After a five-year period , transferred assets will no longer subject you to penalties or delayed eligibility for Medicaid’s long-term care benefits.

Planning in advance, before you even need nursing home care, provides the most advantages.

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Basic Estate Planning: The Nursing Home Dilemma

This fact sheet has an additional reference that can be ordered at no cost. The Ohio Shopper’s Guide to Long-Term Care Insurance is an excellent bulletin produced by The Ohio Department of Insurance. A copy can be obtained free of charge by calling 1-800-686-1526 or 1-800-686-1578. The Ohio Department of Insurance also has additional free consumer guides on automobile and home insurance, and numerous other insurance publications that you can also order by calling the above toll-free number.

The nursing home dilemma is of concern to all, but not totally different from other concerns. For instance, we are concerned about being sued because we might be liable for damages we cause in an automobile accident. Thus, most buy automobile liability insurance. We are also concerned about being disabled, loss of income, etc., but might or might not have insurance to cover those risks. Following are some things to consider concerning the nursing home dilemma and whether you should purchase long-term care insurance .

What Assets Are Protected From Medicaid

There are a couple of topics to consider in this section. First, in terms of qualifying for Medicaid, some of your assets will not be counted toward that limit we discussed earlier.

For instance, things like personal belongings, IRAs, equity in a primary home, and a vehicle all fall in the exception category to not be counted against your asset limit.

What is counted for those asset considerations are things like cash, investments, checking accounts, non-primary residences, etc. If the total of those assets exceeds the limit, youâll be on the wrong side of the qualifying picture.

With this in mind, many people look for ways to protect their assets from Medicaid, so they arenât considered in the eligibility equation. One such option to protect assets is a Medicaid Trust.

One of the most important pieces of this puzzle is to make sure that your trust is established before the look-back period for your Medicaid qualification. The standard look-back period is five years, meaning you will want to have dealt with this issue at least five years before you plan to apply for benefits. If you establish your trust somewhere within that five-year window, it wonât be considered exempt and the assets within the trust will be counted as part of your application.

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Why Do Assets Matter

First, weâd like to take a step back and explain why there is so much fuss around assets when talking about Medicaid benefits.

Simply put, if you have too many assets, you wonât qualify for Medicaid. For instance, for a married couple in New York in 2020 who are both applying for benefits, the asset limit is $23,100. If a couple holds more than that amount of assets, they will not be approved for benefits.

So, what we are talking about here is the matter of managing assets in a way that will allow you to become eligible for Medicaid. In other words, just because you have too many assets at the moment to be eligible, that doesnât mean you can rule out the possibility of becoming eligible in the future.

As we work through this article, youâll learn what you might be able to do to become eligible while protecting your assets.

Step : Before You Get Sick Give Monetary Gifts To Your Loved Ones

Let us help you protect your assets from Medicaid

Of course, there’s no way to tell for sure whether or when you’ll need nursing home treatment, so giving presents to your loved ones ahead of time protects the money from creditors looking to recover after your death. Any properties you pass within the five years prior to joining a treatment facility are liable to seizure after your death while you are on Medicaid. Transferring funds before you get sick protects the assets and guarantees that your loved ones can legally hold the presents you give them.

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When Protecting Assets From Nursing Home Costs How Much Income Can I Make And Still Qualify For Medi

An individual over sixty-four with a net income less than about $2200 per month can qualify. One with over $2000 may also qualify depending on their nursing home costs. Income must be paid to the nursing home.

A spouse of a person who is eligible for Medi-Cal is entitled to a monthly income not to exceed approximately $2960 per month.

The Realities Of Long

According to the National Institute on Aging, addressing the needs of older adults will become an increasingly important responsibility for individuals and society alike. The number of adults aged 65 and older is expected to skyrocket while family structures have shifted to leave those older adults with fewer options for care. Throughout human history, the number of children has outnumbered the number of older people, but these patterns are set to reverse. Declines in fertility rates coupled with increasing life expectancies have changed typical trends for managing the care of older adults.

Within this population of older adults, those who are age 85 and older are among those most likely to need ongoing long-term care. In high-income countries â including the United States â non-communicable diseases already make up a vast majority of the burden of disease – collectively costing billions of dollars a year, a number that is expected to rise alongside the increasing population of older adults.

About 50% of older adults use Medicaid to help cover these expenses, and long-term care expenses account for 70% of the total Medicaid expenses used nationwide.

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Step : Hire An Attorney To Draft A Life Estate For Your Property

With a potential ownership interest in the home, naming you as the life tenant and a loved one you trust as the âremainderman.â As a life tenant, you have the freedom to stay in your home until you pass away. Following your passing, possession of the property is passed to your loved one, preventing the state from claiming it. If you build a life estate and pass real estate, you won’t be penalized if you end up in a nursing home, as long as the transfer took place at least five years before your illness. However, if you join a nursing home within the five-year period, you will be charged a fee for moving property that would otherwise be eligible for estate recovery.

Should I Sell The House To My Children

Medicaid Asset Protection Trust

In some circumstances this will be an option. Although its unnecessary in this fact pattern. In Florida, houses valued at $560,000 can be exempt from being counted as a resource in the eyes of Medicaid if the applicant has an âintent to return homeâ. So, here, since the house is only worth $500,000, the Medicaid applicant will not need to sell their house in order to qualify for Medicaid. In fact, Medicaid only looks at the equity in the home â since the house has a$200,000 mortgage on it, Medicaid essentially only looks at the house as a$300,000 asset .

In fact, paying off a mortgage is a very productive and valuable spend down strategy. If someone has $300,000 of equity in a house worth $500,000, they can then take $200,000 worth of cash and pay off their mortgage!

But if the house was over the $560K limit, an option would be to sell the house to the children and then shelter the money using a number of Medicaid-planning strategies . Another option would be for the homeowner to obtain a reverse mortgage and then sheltering the excess cash.

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Why You Shouldnt Give Assets Away To Become Eligible For Medicaid

If you think you can get around the Medicaid spend down requirement by giving away your property to your family before going into a nursing home, you should know that Medicaid is way ahead of you. There is a five-year look-back period for asset transfers when you are applying for Medicaid. If, within the five previous years, you have transferred an asset for less than its fair market value, your eligibility for Medicaid benefits could be delayed or denied when you need it most.

If the prospect of needing a nursing home is in the distant future, you may be able to get around the look-back period by making your gifts outside of that five-year window. But that is a very risky proposition. An illness or injury could cause you to need care sooner than you expect, for one thing. But there are other reasons as well.

If you transfer an asset, such as a house or financial account, to a family member, it becomes theirs to legally do with as they please, even if you have a verbal agreement that they will use the asset only for your benefit. You may think your child or grandchild would never sell your house out from under you or drain your bank accountand you might be right. If you are wrong though, there is little you can do about it.

In short, there are a number of ways that giving away your assets to avoid paying them to the nursing home can go wrong. Fortunately, you have other options if you are trying to protect assets from nursing home costs.

Planning Ahead For Nursing Home Costs

Long-term care insurance may be available to cover or defray the expense of nursing home care. However, very few older adultsless than 10%have long-term care insurance. The premiums can be expensive, and grow even more so the later you wait to obtain the insurance. Some people are in denial that they would need it, and are reluctant to pay high premiums for a benefit they may never receive. Others, unfortunately, wait too long and become ineligible.

The industry has responded to these problems by now offering life insurance and annuity based hybrids. These hybrids offer the benefits of traditional long term care insurance, while avoiding rate increases and preserving a death benefit if the coverage is never needed. It is definitely worthwhile to explore long-term care insurance options.

Another, more accessible Medicaid planning option is a Medicaid trust. A Medicaid trust is specially designed to contain assets in a way that makes them not countable for purposes of Medicaid eligibility most trusts are not structured in such a way to protect assets from nursing home costs, so dont assume that a trust you already have will do the job.

A Medicaid trust is only one of many Medicaid planning options that are allowed under our states Medicaid rules.

With offices in Northville and Brighton, we invite you to contact our law office if you have any questions about Medicaid trusts or other forms of asset protection.

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Asset And Income Limits

To qualify for Medicaid, an applicant needs to meet strict financial requirements, including assets and income limits. The asset and income limits refer to the value of assets or amount of income that the law allows a person to have and still qualify for Medicaid. However, the limit requirements vary between states. As a result, the amount of money an applicant needs to protect from Medicaid depends on where they live. Additionally, the law exempts certain assets and income from the asset and income limits. For instance, in most cases an applicants primary home is not subject to asset limits, while cash flow from Medicaid compliant annuities is not subject to income limits.

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Lisa Sullivan, MS, is a nutritionist and health and wellness educator with nearly 20 years of experience in the healthcare industry.

Long-term care in a nursing home can be expensive. In 2020, the average cost for a semi-private room was $7,756 per month, increasing to $8,821 per month for a private room. When you consider the average Social Security payout in June 2020 was about $1,500 per month, this leaves seniors to struggle to afford the care they need.

It’s no surprise that so many people turn to Medicaid for help. Medicaid pays for nursing home care more than any other type of insurance. Unfortunately, it does that by making you spend down your assets.

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  • Ethan Huizenga

If youre helping an aging parent navigate Medicaid because they dont have long-term care insurance or you think youll need it yourself someday, its important to understand how the program works.

Medicaid is a government program used by Americans to pay for nursing home and long-term care. The Medicaid Estate Recovery Program is used to recoup costs paid toward long term care, so that the program can be more affordable for the government, says the article What is Medicaid Estate Recovery? from Beneficiaries of Medicaid recipients are often surprised to learn that this impacts them directly.

Medicare was created to help pay for healthcare costs of Americans once they reach age 65. It covers many different aspects of healthcare expenses, but not costs for long-term or nursing home care. That is the role of Medicaid.

Medicaid helps pay the costs of long-term care for aging seniors. It is used when a person has not purchased long-term health care insurance or does not have enough money to pay for long-term care out of their own funds.

Medicaid is also used by individuals who have taken steps to protect their assets using trusts or other estate planning tools.

In some states, recovery may be made from assets that are not subject to probate: jointly owned bank accounts between spouses, payable on death bank accounts, real estate owned in joint tenancy with right of survivorship, living trusts and any assets a Medicaid recipient has an interest in.


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