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Can You Use Estate Planning to Prepare for Medicaid?

Feb. 24, 2021

When thinking about the future there is quite a bit to consider. One of those is what you’re going to do if you can’t stay in your house as you get older. If you would need to end up in a nursing home, keep in mind that long-term care is very expensive. In many instances, individuals will pay for it with their savings until it runs out. After that happens, they can then qualify for Medicaid to take over the costs.

What Is Medicaid?

Medicaid is a federally-funded program that helps individuals with low/limited income. You also can have no more than $2,400 in countable assets. There are several rules that come into play when dealing with Medicaid. One of them being, there can be no transferred assets within five years of applying for Medicaid. If you do have any transferred assets within five years of applying, you could be subject to a penalty period and during this time you would receive no benefits. Medicaid also has the right to recover from your estate, after you pass away. For most people using Medicaid, this would usually mean their house.

So, how Can You Use Estate Planning to Prepare?

If you have plans to leave something behind for a spouse or children, careful planning is important. Making plans before you would need the long-term care, gives you the ability to distribute or protect your assets. Let’s dive in further:

Trusts: Setting up a trust for your children or spouse is one of the most important things you can do when estate planning. The most popular trust is an “irrevocable” trust. This trust is usually drafted so the income is payable to the person establishing the trust, for life. When you pass away the principle is paid to your heirs. In relation to Medicaid, the principle is not counted as a resource. However, should you move into a nursing home, the trust income will go to the nursing home.

Your Home: Medicaid tries to recoup what they paid out for an individual, after this individual dies. In most cases, a house is the only asset that is available. However, you can do steps now to prepare and protect your house. There are two options for you to choose from: putting your home in a trust or setting up a life estate. Here at Curran Estate Law, we can assist you in determining which is the right choice for you.

Annuities: Annuities are a great tool for married couples to prepare for Medicaid. In most cases, an annuity is viewed as an investment, not income. The most common to set up is an immediate annuity. This is something that you would set up with your insurance company. Here’s how the process works: the policyholder pays a certain lump sum of money to the insurer and the insurer sends the policyholder a monthly check for the rest of their life.

In the end, there are several routes to take when it comes to Estate Planning and preparing for the future. Contact us today and let’s discuss the best route for your situation and begin the process of protecting your assets!

Reference – Using Estate Planning to Prepare for Medicaid (