While it’s best to plan for long-term care well in advance of needing care, if you haven’t planned ahead, there are some strategies to avoid spending all of your assets. Three so-called “half-bread” approaches allow a Medicaid applicant to assign certain assets while remaining eligible for Medicaid.

In order to be eligible for Medicaid benefits, a resident of a nursing home may have no more than $ 2,000 in “accountable” assets (the figure may be a bit higher in some states) and the resident cannot have recently transferred assets. Congress has imposed a penalty on people who transfer assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period does not begin until the transferor has (1) moved to a retirement home, (2) has spent up to the asset limit for Medicaid eligibility, (3) requested Medicaid coverage and (4) was approved for coverage but for transfer.

If a Medicaid claimant has excess assets, they must spend those assets to be eligible for Medicaid. However, Medicaid candidates who wish to preserve certain assets have several options:

  • Give and heal. The nursing home resident transfers all of their funds to the resident’s children (or other family members) and applies for Medicaid, enjoying a long period of ineligibility. Once the Medicaid application is filed, the children return half of the funds transferred, thereby “curing” half the period of ineligibility and giving the resident of the nursing home the funds he needs to pay for the care up to. the expiration of the remaining penalty period.
  • Promissory note. The nursing home resident gives half of their funds to the resident’s children (or other family members) and lends the other half to them in the form of a promissory note that meets certain Medicaid requirements . The resident uses the monthly loan repayments, along with their income, to pay the costs of the retirement home during the penalty period.
  • Annuity. The retirement home resident gives half of their funds to the resident’s children (or other family members) and uses the remaining assets to purchase an immediate annuity. In most states, the purchase of an annuity is not considered a transfer that would render the purchaser ineligible for Medicaid. The income from the annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short term, just long enough to cover the penalty period.

These strategies may not work in all states, and none of them should be attempted without the help of a lawyer. To find a lawyer near you, click here.

Last modified: 06/10/2021

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