Asset Restructuring for Long-term Care

In the last five years of life, long-term care is estimated to cost between $233,00 and $367,00 on average. Those with long-term care insurance are still paying $140,000 out of pocket. The price associated with long-term care is incredibly intimidating, and unfortunately, due to high premiums and limited options, many people do not have long-term care insurance coverage. Those without insurance have two options:

  1. Pay hundreds of thousands of dollars for long-term care
  2. Use Medicaid benefits to offset the cost

When we look at these two options, neither may actually be attainable. The out-of-pocket cost is too great for most Americans. Yet, at the same time, many don’t qualify for Medicaid benefits because their assets are too great. This dilemma leaves many searching for more creative options. And the solution may be simply restructuring assets.

Medicaid Qualification

There is a common misbelief that Medicaid is only for low-income seniors. However, with proper estate planning, most people can qualify for benefits.

Medicaid is a need and means-based program. Those who apply must qualify by meeting certain benchmarks regarding their ability to pay for care. Annual income and personal assets are the two primary factors. In order to qualify for Medicaid, an individual can’t have over $2000 in assets. Therefore, a creative way to qualify for Medicaid is to become asset poor.

Imagine working your entire life to build a legacy for your family, only to sell everything to afford long-term care, qualifying for benefits only when nothing is left. This doesn’t have to be the case if you legally restructure your assets.

Asset Restructuring Strategies

The Medicaid “asset test” is complex and varies from state to state. Broadly speaking, an individual must have less than $2000 in assets, with the exception of their home if they are currently residing in it or plan to return to it. A few different options allow for asset protection and Medicaid qualification.

  • Ownership transfer: One can simply transfer ownership to a family member or trusted individual. However, this option does pose some risks. If the person were to experience bankruptcy, a lawsuit, or death, you risk losing those assets completely. Additionally, Medicaid does have a five-year look-back period. So, proper planning is a must.
  • Asset protection trusts:  Assets can be transferred into a properly designed trust that removes them from your estate. These trusts, also known as “Medicaid Trusts,” not only allow for Medicaid qualification but also serve to protect assets from other creditors.
  • Spousal refusal: Depending on the state, “spousal refusal” may be permitted and is an option for married couples. With spousal refusal, the healthy spouse legally refuses care and support for the spouse who needs it. This immediately makes the spouse in need eligible for Medicaid benefits, as Medicaid can’t refuse care due to spousal refusal. It’s important to note that Medicaid does maintain the right to request a financial contribution from the healthy spouse. However, they often don’t follow through with the legal action required to seek payment.
  • Spousal transfer: The transfer of assets to a spouse is permitted under Medicaid laws without penalties or being subject to the five-year look-back period. If married, this may be the easiest way to protect your asset.

Ensuring Asset Protection and Medicaid Qualification

Restructuring your assets and implementing various income strategies is complex and varies greatly depending on legislation. Proper planning, preparation, and strategizing are essential to ensure Medicaid qualification while simultaneously protecting your assets. With experience and an understanding of asset protection, an elder law attorney is vital in this process. We invite you to contact our office today at (954) 315-1169 to schedule a consultation.


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