Can I Protect My Assets From Medicaid?

By some estimates, the incidence of Alzheimer’s disease will triple by 2050. As a result, an increasing number of American families will have to deal with the issue of long-term care. With costs approaching $60,000 per year, nursing homes and assisted living facilities can be a financial burden even for people in the upper middle class.

Medicaid, a joint federal and state government program, provides assistance for long-term care. However, Medicaid has strict eligibility requirements. These requirements often force applicants to divest all of their assets. For many, this is untenable. But can you do anything to avoid it? The answer is yes, with a couple of caveats.

First, Medicaid penalizes uncompensated transfers. This means you cannot give away property to qualify. The good news is that Medicaid looks back only five years from the date of your application. Thus, gifts before that time are not a factor. Second, you must relinquish at least some control over your estate.

So, what steps can you take to protect your assets from Medicaid? One option is creating a special type of irrevocable trust.  Such trust must be managed by an independent trustee, and cannot be amended or revoked. Another possibility is to sell property in exchange for a promissory note, which is structured so that it does not count against your Medicaid eligibility.

Both of the above options should be carried out only with the supervision and counsel of a knowledgeable estate planning and Medicaid attorney. Also keep in mind that because these are highly advanced estate planning techniques, the cost is higher than a basic last will and testament or a revocable living trust. That said, it may be worth it to leave a legacy by having money to pay for the grandchildrens’ college education or passing down the family farm to the next generation.