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Applying For Medicaid, Tips On Getting More Funding

Sep 3, 2008
There are a few things you can do using Medicaid planning to rearrange finances and legally shelter your assets from the state. The strategies can be very complicated so you may want to consult an elder law attorney to help you with the specifics.

You would be accomplishing a few goals in Medicaid planning including:
1. Sheltering countable assets
2. Preserving assets for your heirs
3. Providing for your healthy spouse

Lets examine each strategy in detail
Sheltering your countable assets: The total value of your countable assets(including your income), determine whether you are eligible for Medicaid. Under federal guidelines, each state has a list of exempt assets. This list usually includes items like the family home, prepaid burial plots and contracts, term life insurance, and one automobile.

You can rearrange your finances so that countable assets are exchanged for exempt assets and thus made inaccessible by the state.

For example, you can exchange spending your savings on nursing home bills for;
1. paying off the mortgage on you family's home
2. prepay for burial arrangements
3. make home improvements
4. purchase one car for your healthy spouse

Irrevocable trusts: Why not simply liquidate all your assets to pay for nursing home care? After all, won't Medicaid kick in after you have exhausted all of your assets? The reason is this: You want to help out your loved ones financially. You would rather leave something to them, rather than to strangers.

Using an irrevocable trust can help you leave something for your loved ones. (We use the word irrevocable because you can't come back and change it later or decide to end it) Property placed in an irrevocable trust will be excluded from your financial picture, for Medicaid purposes. Anything that you place into the trust (and possible income) can be sheltered from the state and preserved for your loved one. More often than not, the trust must be in place and funded over a specific period of time for it to be an effective Medicaid planning tool.

Annuity: How do you guarantee that your spouse has enough money to live on if you have to go to a nursing home?

When the state is considering eligibility for Medicaid, a couple's assets are pooled together. Your healthy spouse is generally given a resources allowance amount to one-half of the assets. As you can imagine, this may not be much money over the long term especially if your spouse needs to take time off of work.

If you're married, an annuity can help protect your healthy spouse. An important loophole in the law is that your healthy spouse can use jointly owned countable assets to buy a single premium immediate annuity to benefit himself or herself. By doing so, you effectively convert countable assets into an income stream. Each spouse is then entitled to keep all of their own income instead of pooling assets. The end result is that the institutionalized spouse can more easily qualify for Medicaid.

Medicaid Planning Risks

You should be aware of look-back periods, estate recoveries, and possible disqualification for Medicaid.

When applying for Medicaid, the state has the right to look back at your finances for a period of months before the application date. Generally, there is a 36-month look-back period for transfers of countable assets, along with a 60-month lookback period for similar transfers into irrevocable trusts. Countable asset transfers for less than fair market value made during the lookback period will commonly result in a waiting period before you can start to collect Medicaid. For example, if transferring your house to your children a year before entering a nursing home will make you ineligible for Medicaid for quite some time.

Also, understand that Medicaid planning is more effective in some states than others.

In most cases the answer is no. There are two reasons for this. First, unless you fall within an exception, your mother could lose Medicaid eligibility for five years by transferring the house to you. The exceptions would apply if you were disabled or if you lived in the house and provided care to your mother for the two years before you went to a nursing home.
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