Medicaid Asset Protection

In addition to setting up proper estate planning, nursing home planning and Medicaid asset protection may be necessary. In Missouri, what was previously named Medicaid is now known as MO HealthNet. In most cases, some of a person’s assets can be saved when a family member is going into a nursing home. However, this is a very complex area of law, and no two people have the same set of circumstances.  A consultation with an attorney practicing in the area of Elder Law can save you time and money. Generally, there are two different types of Medicaid planning: planning in advance and crisis planning. Crisis planning refers to what assets can be protected after a person has already entered into a nursing home.

Planning in Advance:

Because Medicaid (MO HealthNet) has a 5-year look-back period, to protect all of your assets from being spent on nursing home care those assets would have to be transferred out of a person’s name 5 years prior to entering a nursing home. This can occur by actually gifting property and money to family members. However, an Irrevocable Medicaid Asset Protection Trust can be used instead of direct gifts.

How does an Irrevocable Medicaid Asset Protection Trust work?

Medicaid, known as MO HealthNet in Missouri, has a 5-year look-back period for gifting. That means if you gift away all of the assets today, in five years you would qualify for Medicaid to assist with paying for a nursing home without being penalized for the previous gifting of assets. With proper planning, it would give a person the ability to shelter their assets for their family instead of paying for all long-term care costs themselves. However, there are other valid planning techniques, and irrevocable trusts are not always desirable to some people. When you gift assets to a Medicaid compliant irrevocable trust, it works similarly to simply gifting assets away to another person. You would lose control of the assets. The trustee or trustees of your trust would have sole control. Placing assets in an irrevocable trust does have benefits over a direct gift to a person due to the creditor protection clauses contained in the irrevocable trust which most likely would shield the assets from the creditors and bill collectors of the beneficiary (until such time as the assets are transferred out of the trust directly into their individual name). Also, trusts allow for multiple trustees to have shared control which can create more protection for the assets.

How to save the Family Farm?

One of the most popular assets to protect is the family farm. Most people do not wish to use a family farm to fund their retirement or long-term care and instead intend to leave it for future generations. The thought of transferring ownership to an Irrevocable Medicaid Asset Protection Trust does not bother most parents since they did not truly consider the farm as their personal asset anyway. The primary issue to keep in mind is that the owners of the farm need to have 5 years pass between the transfer of the farm and an application for nursing home Medicaid benefits. Planning ahead becomes more important in regard to an asset such as the family farm because of this reason.

Crisis Planning:

When planning does not occur in advance, some parents still wish to do strategic gifting of their assets at the last minute to save as much as possible for their children. This can happen immediately prior to entering a nursing home or after having already entered the nursing home. Each family and every individual has a different set of goals, and there is no correct answer when formulating a nursing home plan. For those parents who have a primary goal of saving assets for their children, far more than they realize can be saved even at the last minute. However, in order to save assets, it usually becomes necessary to sell off and liquidate property and retirement savings.

How to spend down assets?

A valuable planning strategy after a person has already entered the nursing home is to spend down resources to purchase allowable items (known as exempt assets) before applying for vendor MO HealthNet (nursing home Medicaid) benefits. If a person has not yet purchased an irrevocable pre-need funeral/burial plan or irrevocably assigned a life insurance policy to a funeral/burial plan agreement, they can do so without penalty by following special Medicaid guidelines. The purchase of an automobile (or upgrade of current automobile) may be made. It is possible that a wheelchair accessible automobile would be necessary for transportation to and from medical appointments. If a healthy spouse will remain in the home, money may be used on home improvements and upgrades. Payment of debts is an additional way to spend down assets.

For married couples, how can the assets be protected for the healthy spouse?

The assets of both the husband and the wife are counted for purposes of qualifying for vendor MO HealthNet (nursing home Medicaid). Therefore, placing assets in only one of their names will not shelter those assets. For married couples where one spouse is remaining in the home, only a certain amount of the assets may be kept by the healthy spouse. The remaining assets would have to be strategically spent down using qualified exceptions to the Medicaid rules. Sometimes this is accomplished by turning assets into income. An Elder Law attorney can usually assist a spouse in protecting nearly all of the assets in most circumstances.

Protecting assets for a single person.

Nursing home planning for the single person consists of balancing gifting with the 5-year look-back period. It is not that a person is prohibited from gifting, but rather that the gifting creates a penalty period preventing immediate qualification for nursing home Medicaid (known as vendor MO HealthNet). By balancing the gifting away of some assets with converting other assets into an income stream, the nursing home can be paid for by a person’s own money while also waiting for a penalty period to expire. These are complicated techniques used by Elder Law attorneys, but strategies can usually be utilized at the last minute to save at least some portion of the assets.

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