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LONG-TERM CARE PLANNING
STRATEGIES
What are some specific strategies that will comply with current Medicaid eligibility rules as
discussed in the previous sections of this article?
PRECAUTION ON ASSET TRANSFERS
When considering asset transfers as a Medicaid planning
technique, keep in mind that the advisability of any such transfer will depend
on a number of factors. Before a specific asset transfer strategy is employed,
it should be analyzed in light of the following questions:
●Would this donor (i.e., the person transferring the
assets) make this transfer to these particular donees, and in this amount and at this time, if Medicaid eligibility were not a
concern? Is the proposed transfer consistent with the donor's underlying estate
plan?
●Does the proposed transfer make economic sense?
Is the strategy reasonable from any viewpoint other than Medicaid eligibility?
●What are the tax consequences of the transfer? (The rush
to transfer assets for Medicaid eligibility can create tax traps for the unwary.)
●What is the donor's life expectancy? Is it likely
that he or she will survive the resulting period of ineligibility?
SPECIFIC STRATEGIES
With these cautionary
points in mind, the following are examples of asset transfer techniques that may
have merit in the right situation:
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TRANSFER ASSETS TO THIRD PARTY WITHOUT
CONSIDERATION. If the donor is willing to engage in long-range
eligibility planning, gift transfers can be made early to start the running of
the 60-month look-back period. |
The real question here is how much to transfer,
and how much to retain to pay for nursing home care during the 60-month look
back period.
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CONVERT "COUNTABLE RESOURCES" INTO "EXEMPT ASSETS."
Rather than transferring assets to a third party or a trust, or continuously
spending down countable resources on nursing care costs until the $2,000 (or
$2,400) floor is reached, the donor or his or her spouse can remove countable
resources by converting them into exempt assets. In this case, it is essential
that the transferor retain title to the exempt asset, to rebut any presumption
of a transfer. |
BUT – see the limits to this technique under the
Medicaid estate recovery program, discussed below.
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PURCHASE OF ANNUITY FOR COMMUNITY SPOUSE.
Even though the state must be named as a residuary beneficiary of
an annuity purchased after February 8, 2006, the purchase of an annuity for the
community spouse may still be beneficial, since it will lock in an income stream
with assets that otherwise would have to be spent on nursing home care for the
institutionalized spouse. |
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TRANSFERS INTO TRUST. A transfer of assets into certain kinds of irrevocable
trusts may still a viable option for Medicaid eligibility purposes. While such
transfer will trigger the look-back rule and will result in some period
of ineligibility, after that period expires the trust principal will not be
treated as an available resource. |
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INTER-SPOUSAL TRANSFERS
. For a married couple where one spouse is institutionalized,
it is usually beneficial to take advantage of the exemption for inter-spousal transfers.
After a married individual is institutionalized, he or she (or an agent acting
under a well-drafted Durable Power of Attorney) should transfer title to all
assets in which he or she has sole or joint interest to the community spouse, in
order to avoid the Medicaid estate recovery program (see discussion below).
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