Avoiding Common Medicaid Spend-Down Mistakes-What Couples Need to Know

When a family member requires long-term care—particularly in a nursing home—many families are understandably concerned about the financial implications. Medicaid can provide crucial support, but qualifying for benefits often necessitates a “spend-down” of assets, which can inadvertently lead well-intentioned couples to make costly errors.

If you’re considering Medicaid to help cover long-term care, understanding the spend-down process is essential. Many families want to preserve what they’ve worked hard for while ensuring access to quality care, but minor missteps can lead to significant setbacks. Here’s what to know so you can plan confidently and avoid common mistakes.

What Is Medicaid Spend-Down?

Medicaid imposes strict income and asset limits. If your assets surpass the established threshold, you’ll need to reduce them (or “spend down”) before you can qualify.

However, the manner in which you spend down those assets is crucial. Some actions, although they may appear beneficial, can result in ineligibility, penalties, or delays in receiving care coverage.

Common Spend-Down Mistakes to Avoid

1. Gifting Money or Property to Children
   
   It’s understandable to want to assist your children, but transferring money or property can activate Medicaid’s five-year look-back period. If Medicaid views these transfers as attempts to circumvent eligibility rules, they may impose a penalty period during which benefits could be denied—even if you would otherwise qualify.
   
2. Transferring the Home Too Late
   
   Families often delay transferring a home, unaware that it may be considered an asset depending on how and when the transfer occurs. If this is done incorrectly or too close to the application date, it could jeopardize the applicant’s eligibility for Medicaid benefits.
   
3. Selling Assets Below Market Value
   
   Selling a vehicle, home, or valuable items for less than their fair market value may seem like a quick solution. However, Medicaid views such undervalued sales as a red flag. These transactions can be regarded as partial gifts, potentially triggering a penalty period.
   
4. Relying on Outdated or Incomplete Information
   
   Medicaid regulations differ by state and can change over time. What was effective for a neighbor or relative five years ago may no longer be applicable. Relying on anecdotal advice can lead to unintentional errors.

A Better Approach: Strategic Planning with Professional Help

The good news is that there are legal and ethical methods to safeguard assets while qualifying for Medicaid—but this requires an understanding of the system and strategic planning.

With assistance from a firm experienced in asset protection and estate planning, couples can explore various strategies, such as:

• Establishing a Medicaid Asset Protection Trust (MAPT)
• Reallocating certain assets into exempt categories
• Leveraging the Community Spouse Resource Allowance (CSRA)
• Making timely and structured transfers or purchases

Why Early Planning Makes a Difference

The earlier you begin planning, the more options you’ll have at your disposal. Even if care is needed immediately or in the near future, it’s still possible to develop a strategy that safeguards a substantial portion of your resources.

Let’s Talk About What’s Possible

Every couple’s financial situation is unique, and qualifying for Medicaid doesn’t have to mean sacrificing everything you’ve worked hard to achieve.

At Rutkowski Law Firm, we help families across Michigan make confident, informed decisions, enabling them to safeguard their future while securing the care they need.