Shelter Assets to Obtain Medicaid
Nursing homes provide a valuable service for elderly and disabled individuals who cannot adequately care for themselves. The cost of this care can be steep, however. A typical nursing home stay costs an average of $50,000 a year. Medicaid, a federal insurance program for low-income individuals, will cover nursing home care, but you may not be able to qualify for that care until you have exhausted your existing assets. Unfortunately, this leaves you without the financial security you previously enjoyed if you decide to return home. It also absorbs money you might prefer that your loved ones inherit after you pass away. While hiding assets from the government is a criminal offense, you can legally shelter certain assets and avoid using them to pay for the high cost of a nursing home stay.
There are several ways to obtain Medicaid. The easiest way is to gift away your assets during life. However, you may lose certain taxable benefits in doing so. In the case of Medicaid, any assets you transfer within the five years prior to entering a care facility are subject to seizure after your death. Transferring funds before you fall ill shelters your money and ensures your family members can legally keep the gifts they receive.
A “life estate” for your real estate, naming you as the life tenant and a loved one you trust as the remainderman, with future ownership interest in the property. As a life tenant, you retain the right to continue living in your home until your death. After your death, ownership in the property is transferred to your loved one, which prevents the state from making a claim against it. If you create a life estate and transfer real estate, you’ll incur no penalty if you enter a nursing home, provided the transfer occurred at least five years before your illness. If you enter a nursing home within that five-year window, however, you may incur a financial penalty for transferring property that would otherwise have been available for estate recovery.
Another method is to shelter your money through an irrevocable trust. Unlike a living trust, an irrevocable trust is exempt from nursing home costs. You cannot receive principal from the irrevocable trust, but the periodic interest and dividends you receive from the trust are safe from seizure. Unlike life estate, you can place any tangible or real property into an irrevocable trust.
For more information and to understand how and what will best suit your needs, please contact us 347-565-0512.