Exploring Planning Approaches
How Can You Protect Your Home and Qualify for Medicaid at the Same Time?
Qualifying for long-term care Medicaid can feel like walking through a financial minefield. Income limits, asset caps, and Medicaid’s strict rules mean one wrong move can delay—or even deny—your eligibility. At the same time, you may want to protect your home and savings for your family.
The good news? There are proven planning techniques—some simple, others more complex—that can help you meet Medicaid requirements while preserving what matters most. Many can be done with little or no professional assistance, though others work best with expert guidance.
What If Your Income Is Too High for Medicaid?
Could a Qualified Income Trust Solve the Problem?
In states that allow them, Qualified Income Trusts (QITs), also called Miller Trusts, can be a lifeline for applicants who earn just over Medicaid’s income limit. Extra income is deposited into the trust, where it’s no longer counted for eligibility purposes. Funds must be used for specific expenses like medical bills and care costs, and any remaining balance may go to the state after death.
Can You “Spend Down” Income to Qualify?
If your state offers a Medically Needy Program, you may be able to spend your excess income on medical expenses until you reach the required income threshold. Once you’ve met that limit, Medicaid coverage can begin.
Which Strategies Can Lower Countable Assets Quickly?
Is a Simple “Spend Down” Enough?
Not all spend downs mean wasting money. Medicaid allows applicants to spend assets on approved expenses such as home repairs, paying off debt, or buying medically necessary equipment. Gifting money or selling assets below market value is prohibited due to Medicaid’s look-back period, which can trigger a penalty.
How Do Irrevocable Funeral Trusts Work?
By prepaying funeral and burial costs through a Medicaid-exempt Irrevocable Funeral Trust (IFT), you can lower your countable assets by thousands—often up to $15,000 for singles or $30,000 for couples—without violating Medicaid rules.
How Can Married Couples Protect Resources?
What Is the Community Spouse Resource Allowance?
When only one spouse applies for Medicaid, the Community Spouse Resource Allowance (CSRA) lets the non-applicant spouse keep a certain amount of assets—sometimes more than $150,000—while the applicant is limited to a much smaller amount. This ensures the healthy spouse isn’t left destitute.
Can a Medicaid-Compliant Annuity Shift Assets?
By converting excess assets into a steady income stream for the non-applicant spouse, a Medicaid-compliant annuity can remove those funds from the asset calculation. The annuity must start paying immediately, be irrevocable, and follow strict state rules.
What About More Aggressive Asset Protection Tactics?
Could a Medicaid Divorce Ever Make Sense?
In rare cases—especially when a couple’s assets far exceed the Medicaid limit—legally ending the marriage can protect more resources for the healthy spouse. This is complex, state-specific, and less common today due to spousal asset protections.
Is Spousal Refusal an Option?
In certain states, like New York and Florida, the non-applicant spouse can refuse to make assets available for care costs. Medicaid may still provide coverage, but the state could later sue for reimbursement.
Do Medicaid Asset Protection Trusts Work?
MAPTs transfer assets—sometimes including the home—into an irrevocable trust so they aren’t counted for Medicaid. They must be set up well in advance because they violate the look-back period if done too close to application time.
What Is the “Half a Loaf” Strategy?
This advanced approach involves gifting part of your assets to family and converting the rest into a Medicaid-compliant annuity. You use the annuity payments to cover care during the ineligibility period caused by the gift.
How Can You Keep the Family Home Out of Medicaid’s Reach?
Will a Lady Bird Deed Protect Your Home?
In certain states, a Lady Bird Deed lets you keep ownership while alive but automatically transfers the home to your beneficiary at death—skipping Medicaid Estate Recovery entirely.
Does the Child Caregiver Exception Apply to You?
If an adult child lived with you for at least two years before you needed nursing home care and provided care that kept you out of a facility, you may be able to transfer the home to them without penalty.
Can a Sibling Keep the Home?
If a sibling co-owns the home and lived there for at least one year before you entered long-term care, Medicaid’s Sibling Exception may allow you to transfer ownership to them penalty-free.
What’s the Bottom Line?
Some of these Medicaid planning tools are quick and inexpensive; others are legally intricate and require expert help. Missteps can lead to months—or years—of Medicaid ineligibility. If you’re unsure which strategy fits your situation, consulting a Certified Medicaid Planner could prevent costly mistakes and secure both your care and your legacy.
