If you are a single person who needs to become Medicaid eligible, you are faced with a dilemma: You can keep your home, but only have $2,000 to maintain your home. Where does the money come from to pay the property taxes, the home owners’ insurance, the utilities, etc?
Fortunately, there is a way that you can gift approximately 50% of your non-exempt assets and still become Medicaid eligible. This is accomplished with a “short term” Medicaid compliant annuity or Medicaid compliant promissory note.
In simple terms, you can give away approximately one-half of your non-exempt assets, and use the other half to put into a Medicaid compliant annuity. The gift will trigger a Medicaid ineligibility period. The term of the annuity has to be carefully calibrated to match this period of ineligibility to give the Medicaid applicant sufficient income (when combined with social security, pensions and any other regular income) to pay the cost of the applicant’s nursing home care. Once the annuity is fully paid out, then the applicant is Medicaid eligible. The approximately 50% that if gifted can then be used to cover the costs of maintaining the home, to pay expenses not covered by Medicaid, or eventually kept by the heirs.
Long Term Care Asset Protection Planning for a Healthy Person
If you need for nursing home care is not imminent, it’s possible to set up a trust that may allow you to protect even more assets. For example, an irrevocable trust can be set up with your children as beneficiaries. It may be possible for you to remain as the “income beneficiary” of the trust. Once assets are transferred to the trust, if 5 years pass without the need to apply for Medicaid to cover long term care costs, the assets in the trust will no longer be considered by Medicaid. For married couples, it is possible to establish a testamentary trust for the benefit of your spouse in the estate plan that will protect assets for the surviving spouse without triggering the 5 year look back period.