As part of your estate plan, one thing to consider is if you will need Medicaid in the future and how you should plan for that need.
Medicaid has specific terms and financial requirements. It is considered a “needs-based” benefit, so there are limits on how much money or assets someone on Medicaid can own. If your assets exceed those limits set by the government, then you will need to spend down your assets before you can qualify.
What does it mean to “spend down” your assets for Medicaid?
Spending down your assets is just a way of saying that you’ll need to cover your costs on your own until your resources are below the allowable limit for Medicaid.
Most states allow you to have an income of up to $2,382, as of 2021, but if you are in a nursing home paid for by Medicaid, then you won’t be able to keep that income. Instead, you’ll receive an allowance, and the rest must go toward your care. You can take a simple Medicaid eligibility test through the American Council on Aging to get an idea about your current standing.
If you don’t want to lose your assets, you need to separate them from your estate
To avoid the trouble of trying to qualify for Medicaid with a large estate, what some people do is set up an irrevocable trust. An irrevocable trust is one that you cannot change once established, although you may maintain control of your assets until you pass away. For example, you can place your home in the trust, which is a third party, and have it held for a beneficiary. Upon your death, your home will pass to them. In the meantime, the home is no longer in your name, so it isn’t part of your estate for the purpose of Medicaid planning.
Keep in mind that there are time limits and look-back periods to consider, so making plans now is smart to avoid penalties or missed opportunities. Working with an experienced attorney is wise when you’re thinking ahead to the future possibilities.