As we age, our healthcare requirements tend to increase, and our reliance on Medicare and Medicaid grows. However, while Medicare provides health insurance for seniors, Medicaid provides financial assistance for long-term care. The program is intended to help low-income families pay for medical care, but it also considers an individual’s income and assets.
If a person has too many assets, they may be ineligible for Medicaid, which can be a significant problem for elderly individuals in need of long-term care. In this article, we will examine the necessity of protecting assets from Medicaid and a few potential methods of doing so.
Why Is Protecting Assets from Medicaid Necessary?
Medicaid’s Asset Limits
Medicaid has strict rules regarding the amount of money and assets that are acceptable for eligibility. The limits vary by state, but in general, a person’s assets cannot exceed $2,000, excluding their primary residence. Therefore, an individual with substantial assets may not be eligible for Medicaid, which may prove problematic for long-term care. It may become necessary to protect assets from Medicaid in order to receive care without having to sell off a child’s or grandchild’s inheritance.
Long-Term Care Costs
Long-term care is notoriously costly and can quickly deplete a person’s life savings. Medicaid can cover long-term care costs, but only for those who meet the program’s strict eligibility requirements.
If an individual’s assets are not protected, they may be forced to use their life savings to pay for their care, which can be financially ruinous, especially if they plan on passing something on. In order to ensure that a person’s life savings are not depleted by long-term care expenses, protecting assets from Medicaid is essential.
Estate Planning
Estate planning also tends to warrant protecting assets from Medicaid. This is the delicate process of preparation for the transfer of one’s assets after death.
Due to the high cost of long-term care, these assets could be lost entirely if they are not protected from Medicaid. This can be a major obstacle for those with an heir in mind. Protecting assets from Medicaid can facilitate the transfer of a person’s assets to their intended heirs while still pursuing the benefit of long-term care assistance.
How Can Protecting Assets from Medicaid Be Accomplished?
Trusts
One method for protecting assets from Medicaid is to establish a trust. A trust is a legal arrangement by which a person transfers their assets to a trustee, who then manages them on behalf of the beneficiaries. There are numerous types of trusts, including irrevocable trusts, revocable trusts, and special needs trusts, each of which is designed to address a different need.
Gifting
Gifting one’s assets is another potential way to shield them from Medicaid coverage. In a legal sense, “gifting” is the act of donating one’s property to family or friends.
Regarding Medicaid, however, gifting can be a challenge. Medicaid has a five-year look-back period, meaning any gifts made within five years of the application will be scrutinized. Therefore, gifting should be undertaken with caution. We highly advise consulting an attorney before making any substantial gifts.
Annuities
A third option is an annuity, a financial product that guarantees a stream of income for a specified period or for life. An annuity can help with protecting assets from Medicaid by converting them into a source of income.
Be warned, however: though an annuity may help qualify you for Medicaid, it could also deplete your assets. Before purchasing an annuity, it is essential to consult with an attorney or financial advisor due to how complex they can be.
Protect Your Assets
It’s vital for any seniors wishing to maintain control over their finances or leave assets to their loved ones to consider ways of protecting assets from Medicaid. There are all kinds of reasons this may be necessary, from qualifying for Medicaid to avoiding estate recovery.
Fortunately, there are many viable options for those who pursue help. At Auld Brothers Law Group, we recognize the importance of protecting your assets from Medicaid. We’d be happy to provide you with expert legal counsel to achieve your goals for your future — and your family’s.
Contact us today to schedule a consultation and discover how we can help you protect your assets from Medicaid.