Blog Provided by ElderLaw Answers at https://attorney.elderlawanswers.com/content-hub/article/better-than-no-loaf-medicaid-planning-using-half-a-loaf-strategies-18522
While it is preferable to conduct long-term care planning well in advance of needing care, if you haven’t planned ahead, there are some strategies available to avoid spending all your assets. Two so-called “half a loaf” approaches allow a Medicaid applicant to give away some assets while still qualifying for Medicaid.
In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in “countable” assets (the figure may be somewhat higher in some states) and the resident cannot have recently transferred assets. (A spouse living at home may keep more.)
Congress has imposed a penalty on people who transfer assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period does not begin until the person making the transfer has (1) spent down to the asset limit for Medicaid eligibility, (2) applied for Medicaid coverage, and (3) been approved for coverage but for the transfer.
If a Medicaid applicant has excess assets, he or she must spend down those assets in order to qualify for Medicaid. However, Medicaid applicants who want to preserve some assets have a two options:
- Promissory note. The applicant resident gives half of his or her funds to the resident’s children (or other family members) and lends them the other half under a promissory note that meets certain requirements in the Medicaid law. The resident uses monthly repayments of the loan, along with his or her income, to pay nursing home, assisted living, or in-home healthcare costs during the penalty period.
- Annuity. The applicant resident gives half of his or her funds to the resident’s children (or other family members) and uses the remaining assets to buy an immediate annuity. In most states the purchase of an annuity is not considered a transfer that would make the purchaser ineligible for Medicaid. Income from the annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short-term, just long enough to cover the penalty period.
These strategies may not work in every state and none of them should be attempted without the help of an attorney.
At Severns & Howard our experienced attorneys can help you navigate the complex legal rules and exceptions for Medicaid and to help you to ensure that you or your loved one is able to receive the care that they need. For more information and to schedule a free intake call with our paralegal Alesha Dugger, please call our office at 317-817-0300.