As we age, planning for the possibility of long-term care becomes increasingly important. The cost of long-term care, whether at home or in a nursing facility, can be overwhelming, with many families finding themselves in a tough financial position. Fortunately, Medicaid is a government program that can help cover these costs for those who qualify. However, the process of qualifying for Medicaid can be complex, and without proper planning, you may face delays or be required to spend down your assets.

In this newsletter, we’ll explain who qualifies for Medicaid and why having a well-crafted estate plan is essential in helping you qualify more quickly and protect your assets.

Who Actually Qualifies for Medicaid?

Medicaid provides both healthcare coverage and long-term care assistance for those who qualify.  In order to qualify for the long-term care benefit, you must meet the following financial requirements:

• Income Limits: Medicaid eligibility is based on income. The exact income limit varies by state, but it is typically quite low, especially for long-term care Medicaid.  In the state of Michigan, as long as your cost of care exceeds your income, you can still qualify.
• Asset Limits: Medicaid also has strict asset limits. For most states, an individual can only have $2,000 or less in countable assets (this amount varies by state). Certain assets, like your primary residence, may be exempt up to a specific value, but other assets, such as savings, retirement accounts, and investments, are considered countable.  A married couple can have $154, 140 in countable assets.

If your assets or income exceed these limits, you won’t qualify for Medicaid—unless you take steps to plan and structure your finances properly.

How an Estate Plan Can Help You Qualify for Medicaid

Many people believe they have to spend down all their assets to qualify for Medicaid, but that’s not always the case. With proper estate planning, you can protect your assets while still becoming eligible for Medicaid more quickly. Here’s how an estate plan can help:

1. Medicaid Asset Protection Trust (MAPT)

One of the most powerful tools in Medicaid planning is the Medicaid Asset Protection Trust (MAPT). This irrevocable trust allows you to transfer assets out of your name, shielding them from Medicaid’s asset count. Here’s how it works:

• By placing your assets in a MAPT, they are no longer considered part of your estate for Medicaid purposes.
• You can still live in your home and receive income from certain assets while protecting the principal.
• However, Medicaid has a 5-year look-back period, meaning that you must transfer assets to the trust at least five years before applying for Medicaid to avoid penalties.

2. Spousal Protections

If you are married, estate planning can ensure that your spouse isn’t left without resources if you need long-term care. For example:

• The Community Spouse Resource Allowance (CSRA) allows your spouse to keep a portion of the marital assets while still qualifying you for Medicaid.
• A Spousal Impoverishment Rule can protect your spouse from having to spend down their assets to cover your care costs.

3. Gifting Strategies

Medicaid allows you to gift assets to your loved ones as part of your estate plan, but careful planning is required. There are gifting limits and the 5-year look-back period to consider, so working with an attorney to develop a gifting strategy can help you avoid Medicaid penalties.

4. Income Planning

For individuals with income that exceeds Medicaid’s limits, setting up a Qualified Income Trust (QIT) (also known as a “Miller Trust”) may help. This trust can be used to divert excess income into a trust that is not counted against Medicaid’s income limits, allowing you to qualify without reducing your income.

5. Annuities

Medicaid-compliant annuities can also be part of an effective strategy to protect assets while qualifying for Medicaid. These annuities convert assets into an income stream for the spouse, which can reduce countable assets while providing financial support.

Why an Estate Plan is Essential for Medicaid Planning

Without an estate plan in place, many individuals and families face difficult choices, such as spending down all their assets or risking ineligibility for Medicaid. An estate plan allows you to proactively structure your assets to protect what you’ve built while ensuring you or your loved one can qualify for Medicaid when needed.

Additionally, Medicaid planning can be complex, and attempting to navigate the rules without professional guidance can lead to costly mistakes, such as accidentally triggering penalties during the 5-year look-back period. A well-designed estate plan created with the guidance of an experienced attorney can:

• Accelerate the Medicaid qualification process by strategically transferring and protecting your assets.
• Shield your family’s wealth from being depleted by long-term care costs.
• Ensure your loved ones are financially secure, even if you need care.

How Rutkowski Law Firm Can Help

At Rutkowski Law Firm, we specialize in estate planning that helps you qualify for Medicaid without sacrificing your financial security. Our experienced attorneys will work closely with you to create a customized plan that fits your needs and protects your assets for your loved ones.

We’ll guide you through every step, from setting up Medicaid-compliant trusts to planning around the look-back period and navigating the complex Medicaid eligibility rules.