You Don’t Need To Be Broke To Qualify For Medicaid

Jon Michaels

April 27, 2018

There is a common myth amongst people we speak with that one must have almost no assets and very little income to qualify for Medicaid. And while it’s true in most states that you must have less than $2,000 worth of countable assets and less than $2,250 in monthly income to financially qualify for Medicaid assistance, the reality is that there are various strategies which can be utilized to work around these requirements.

Here are just a few of these strategies:

1. Irrevocable Trust – An irrevocable trust is a legal trust structured where it can’t be modified or terminated without the beneficiary’s permission. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust itself. For Medicaid purposes, any assets held in an irrevocable trust are not considered your assets as long as the trust was funded more than five years ago. So if you have complete conviction that a spouse, child or other family member has your best interests at heart, you may opt to go this route.

2. Medicaid Compliant Annuity (MCA) – This strategy was made possible by the Federal Deficit Reduction Act of 2005. In its simplest form, this is a contract with an insurance company under which the nursing home resident pays a certain amount of money to the insurance company and the company sends a monthly check for a period of time determined by Medicaid rules. Properly structured, this annuity functions as a spend-down tool that eliminates excess countable assets, allowing the nursing home resident to become immediately eligible for Medicaid benefits. Its purchase does not create a transfer penalty, and is not considered an asset. Instead, an MCA turns cash assets into an irrevocable income stream.

3. Wealth Transfer – Under certain circumstances, individual assets may be transferred or deeded, and joint assets may be re-assigned or re-positioned in order to meet Medicaid requirements.

4. Irrevocable Funeral Expense Trust – This is a small life insurance policy that is purchased to cover a client’s anticipated funeral costs and is considered an exempt resource for Medicaid purposes. The policy is controlled by the insurance company’s funeral trust. Most states impose a limit on the amount that can be placed in a funeral trust. Premium limitations vary but are generally limited to $15,000.

Keep in mind that every individual’s situation is unique, which is why we find it imperative to implement custom planning for each of our clients.