As the cost of long term care rises, it will be more important than ever to secure additional funding sources to pay for long term care. For many seniors, Medicaid will become a crucial piece in planning for long term care costs. Nursing home Medicaid covers a significant portion of the monthly cost for either nursing home care or at home care for those seniors who have a medical need for such care. Along with showing a medical need for such care, seniors seeking to qualify for nursing home Medicaid must also meet income and asset test. The asset test can require preplanning years in advance to ensure that the senior does not have assets over the acceptable level for nursing home Medicaid. Planning should also be made to prevent Medicaid from making a claim against the assets at death after care has been provided.
One of the best methods to safeguard assets from long term care costs and to qualify the senior for nursing home Medicaid is to transfer assets out of the senior’s name long before care is needed. Assets that are transferred out of the senior’s name more than five years before the need for care do not count against Medicaid qualification nor do they result in a penalty period. The critical question in such planning is, how much assets should be protected? While the knee jerk response is to protect all of the assets, this may not be practicable or feasible. For the assets to be protected, they need to be given away to trusted friend and family members. Achieving such protection requires that the senior give up direct control over the assets. Most seniors do not want to give away control of all of their assets, leaving them with little to no control. A balance of control and protection from long term care costs is struck by gifting only large assets the sale of which is not a frequent occurrence by the senior, such as with investment portfolios and a residence. These assets are protected while money remains in the senior’s hand to cover day to day expenses.
As gifting assets for Medicaid requires the balancing of several factors, including need for control, reduction of transfer penalties, and tax implications, the advice of an experienced elder law attorney should be sought before gifting is made.