Medicaid Crisis Planning

State law provides a list of exempt assets which usually include: the family home up to a statutory limit, prepaid funeral contracts and burial plots, one automobile, and term life insurance.

Medicaid planning permits the Medicaid applicant the opportunity to rearrange their finances so that countable assets are exchanged for exempt assets. This makes the exchanged assets inaccessible to the state. A Medicaid Applicant can pay off their mortgage on their home, make improvements and repairs on their home, pay off debts, purchase new a car for the healthy spouse (though there is a one car limit per household) and purchase an irrevocable funeral plan contract for both spouses.

Transfers to statutorily exempt persons also make assets unavailable to the state.

Sometimes the purchase of Medicaid annuities makes sense. If an annuity is purchased after February 8, 2005, then the state must be named as the remainder beneficiary after your spouse or minor or disabled child.

There can be certain risks and drawbacks that come with Medicaid planning. You need to be made aware of "look-back" periods, disqualifying transfers, 'penalty provisions,' and estate recoveries. There can be the possibility of needing 'spending-down' your assets to qualify for Medicaid. You may also need to 'share the cost' of your loved one's care in a nursing home.

The state has the right to review and look back 60 months at the Medicaid applicant's finances to see if transfers of countable assets were considered countable because they were made for less than 'fair market value.' Additionally, some states have "Estate Recovery." That is where the state goes after the assets of the decedent to satisfy a Medicaid lien.