The Wall Street Journal
The New York Times
Better Homes and Gardens
Working Mother
Boulder Daily Camera

Medicaid Planning

Medicaid Planning for Nursing Home Coverage

When a person (or couple) needs nursing home care, there are three ways to pay for it:

  1. Long-term care insurance (which few people have)
  2. Pay out of pocket (a great plan if you have sufficient assets)
  3. Medicaid which covers nursing home care for people with limited means.

Notice that we're talking about Medicaid, not Medicare. Medicare will pay for nursing home care for up to 90 days only if those 90 days follow a hospital stay of at least three days.

Medicaid coverage is only available to people who meet strict maximum income and asset tests.

To obtain Medicaid nursing home coverage, the "ill spouse" or single person has to have fewer than $2,000 in countable assets. Their home, car, and personal possessions are not countable so they can have those and still qualify. (Home equity - fair market value minus mortgages - must not exceed $1,033,000.) The "well spouse" can have almost $150,000 in countable assets. It works this way whether the assets are in an living trust or not. Income must not exceed $2,742 per month (in 2023). If the applicant is married and has excess income, they can transfer income to their spouse until they're spouse's income equals $2,288.75 (2023); additional factors (like housing cost) can push that as high as $3,715.50. That's Medicaid Eligibility.

So what do you do if you have too many assets or too much income?

First let me explain the second prong of Medicaid's asset limitations.

After a nursing home resident dies, Medicaid tallies up everything they have spent on that person's care. Medicaid collects from their estate (including that house they let you keep for life) the total Medicaid has spent on that person's nursing home care. That's called Medicaid Recovery.

If the Medicaid recipient was married and their spouse is still alive, Medicaid will hold that bill and wait until both spouses are gone. When both spouses are gone, Medicaid collects what they have spent on either or both spouses from the assets of the second spouse's estate, which include the home, car, and personal property.

Some clients think, "I'll just give my assets to my child(ren), then I will avoid Medicaid Recovery."

If a person gives away any assets of any kind in the five years before they enter a nursing home ("the five-year look-back period"), Medicaid imposes a Penalty. The Medicaid Penalty is a period of months during which Medicaid will not pay for the applicant's care. The Penalty is roughly equal to one month for every $10,000 gifted. So if parents gave away a $500,000 home, their penalty period would be 50 months (roughly). Penalty periods have no limit. So if the penalty period would be longer than five years, then the ill person mustn't apply until that five-year look-back period has expired.

We have tools to address our clients' desires to pass on what they've earned to their children even if they need Medicaid's help to pay for nursing home care. The first-choice strategy is the Medicaid Asset Protection Trust. Properly drafted, clients will retain the right to live in their home for life. Then at their death their home and other assets pass to their beneficiary(ies) without Medicaid Recovery. But this strategy depends on our clients outlasting the five-year look-back period before they apply for Medicaid.

For clients who need a nursing home soon, even very soon, we can help them pass on about half of their assets now with the strategy known as Half-a-Loaf, as in the old saying "half a loaf is better than none." Then there is nothing for Medicaid to recover.

Finally, if your income is too high, we pass on as much as possible to your spouse then partition the remainder so that you keep the maximum amount. This involves transferring income-producing assets. Medicaid gets the income we cannot transfer and that is above what you get to keep.

These are sophisticated and delicate strategies that should be entered into only after clients have had a full conversation with a knowledgeable attorney who will explain the downsides as well as the benefits.

Client Reviews
When my husband died, I felt I needed to honor him for his children and friends. Working through the plans was healthy because I've been a planner professionally. My daughter is not a planner and I know she would not find those endless tasks therapeutic like I did. So I've created a very specific estate plan with Diedre Braverman's counsel, detailed guidance, and support. Now I feel relief knowing that my death will not derail my daughter's life. Barbara Joan Martin
I really appreciate your calming nature. You are incredibly helpful and kind. After speaking with me it was the first time in a long while where I was able to sleep through the night because of your reassurance. Trudy Moore
I trust Bennett and feel his depth of knowledge. The time and energy Bennett spent briefing the beneficiaries of our plan – helping them to know what to expect and what their duties and responsibilities would be – was invaluable. I trust Bennett and feel his depth of knowledge will allow him to serve a wide range of client needs. The ramifications of each decision were fully explained and his adaptation to our family’s needs was exceptional. Anonymous
Diedre took the time to go beyond our initial assumptions and explained how we can benefit from strategies no one had explained to us before. Kathy
Bennett Braverman is a thorough, knowledgeable expert in his field. He did an excellent job in walking us through the Living Trust process, coaching us through decisions, and making sure we completely understood the what we had to do and the associated benefits and risks. We will continue to recommend him to our friends and look forward to partnering with Bennett in the future. Lisa
Justia Lawyer Rating
Super Lawyers
Colorado Bar Association
Wealth Counsel
Boulder County Bar Association