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By The Wyoming LLC Attorney Team

Dec 5, 2022

How to Protect Assets From Medicaid

Estate Planning


To protect your assets from Medicaid and ensure long-term care financing, advanced planning is essential. Strategies include asset protection trusts, income trusts, caregiver agreements, and spousal transfers.

You have several sources for long-term care: your financial assets, long-term care insurance, and Medicaid. However, Medicaid is a means-tested benefit, which means you qualify for Medicaid if you meet the standard for possessing a limited amount of property and income.

Many adults approaching retirement and planning for the long term do not want to dig deep in their pockets to come up with the money necessary to pay for it. If you give away your assets and income to qualify for Medicaid, the federal government might make you ineligible for the popular program.

Advanced planning can help you avoid the Medicaid means test established by Medicaid.

Asset Protection Trust

You create an asset protection trust to protect your assets from creditors, divorce settlements, and legal judgments. The assets that you place in an asset protection trust do not belong to you. This means that you can put assets into an asset protection trust, and Medicaid cannot include the assets in calculating your net worth.

You must plan ahead when establishing an asset protection trust. If you transfer assets to an asset protection trust within five years of when you want to use Medicaid assistance for long-term care, the assets will be counted as part of your net worth.

Income Trust

Applying for Medicaid means you have to reduce your income as much as possible to qualify for benefits. If your income is higher than the maximum threshold established by Medicaid, you can expect to have a Medicaid claim denied.

As a type of irrevocable trust, an income trust holds the amount of money and property that exceeds the income limit established by Medicaid. Some state laws allow residents to spend down the amount of money that exceeds the Medicaid income limit.

Caregiver Agreement

Creating a caregiver agreement can be an effective strategy for receiving the type of services that Medicaid would not cover. Under a caregiver agreement, you choose a trusted family member to care for you when you no longer can care for yourself.

You pay for caregiver services in advance to decrease the income Medicaid uses to determine eligibility. For Medicaid to accept a caregiver agreement, the federal agency wants to see three features.

First, you have to define the caregiver's service and the hours you expect the caregiver to work. Second, you must maintain a daily log of the hours worked and the services provided by the caregiver. Finally, any money left over after you die goes to Medicaid.

Spousal Transfer

Spouses can transfer assets at any time because they are not subjected to the five-year look-back period. Some states allow a healthy spouse to refuse financial support for an ailing spouse, making the sick spouse eligible for Medicaid. However, when Medicaid starts to provide financial support services, the program has the legal right to ask the healthy spouse for financial contributions.

Medicaid does not request financial assistance from a healthy spouse in every case. Sometimes, the program settles for a lower amount. The states that do not allow for a healthy spouse to refuse financial support count the healthy spouse's assets towards Medicaid eligibility.

Closing Remarks

Planning for long-term care requires a considerable amount of foresight. One of the most critical issues is long-term care financing. While not every individual may require these estate planning strategies, we understand the importance of safeguarding your assets from Medicaid. If you're seeking assistance in determining the best option for protecting your assets, start the estate planning process by speaking with an experienced estate planning attorney.