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Medicaid Planning, Strategies & Resources

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February 2, 2022 Medicaid Planning

If your loved one is in need of long-term care, you may need Medicaid benefits to help you subsidize or lower the cost. This is a great way to preserve assets or create a legacy for your family. The only problem is that you have to become eligible to receive benefits.

Medicaid eligibility can be a very difficult process if you don’t know the specific rules in your state, Medicaid terms, or the penalties you can suffer if done incorrectly. Planning becomes key to making sure your eligibility isn’t affected and you know the options you have.


What is Medicaid Planning?

Medicaid planning occurs when someone is preparing to apply for Medicaid. While the process can range in difficulty, it usually includes looking over one's finances, care decisions, and other necessary factors that will be looked at when applying for eligibility.

Medicaid planning can be done alone, however, it can also become a very complicated process and may require outside professional help. The main reason being that Medicaid’s rules can change based on where someone lives, if their spouse is still alive and how many countable assets they own. 

Medicaid Planners

Medicaid planners can help you with all the regulations in your state, double-check where your assets have gone and how much more you need to get rid of along with other requirements for eligibility.

There are many types of Medicaid planning professionals that are available to help including Elder law attorneys, Insurance agents, and Long Term Care planners. Before moving forward with any Medicaid planner, though, you’ll want to make sure they’ve had previous success in getting their clients Medicaid eligibility and that they fully understand the regulations in your state.

You also may be wondering, is Medicaid planning legal? Medicaid planning is legal. While there are certain laws on who can provide advice for Medicaid planning, it is a perfectly legal practice that has actually helped many families figure out care for their loved ones without going broke in the process.


Why Should You Plan in Advance?

Most people begin to plan for Medicaid only when they realize they’re going to need it in the very near future, but that actually will limit the choices that person has for care.

If you’re able to plan in advance, you can begin spending down your assets in appropriate ways and, if you plan more than 5 years in advance of needing Medicaid, you can give assets away without being penalized.


Common Medicaid Planning Strategies


Medicaid Planning for a Married Couple

If one spouse needs care and the other spouse will remain in the main home (also called the community spouse), there are more options available to spend down assets. 

For a couple, Carol and Bob, if Bob needs long-term care, Carol becomes the community spouse that is able to hold onto specific assets like the main home and car, so those assets will not have to be spent down.

However, excess assets will have to be spent down in order for Bob to receive care. After talking with an Elder Law Attorney, Bob and Carol spend down by using a Medicaid Compliant Annuity (MCA). This MCA makes Bob immediately eligible for Medicaid benefits and Carol doesn’t need to deplete her nest egg for Bob’s care.

To see the strategy with financial figures, read here.

Medicaid Planning for a Single Person

Medicaid planning for a single person is quite different than a married couple. Because there is no community spouse, the single person needs to either gift or spend-down excess assets.

Let’s say there is an older, widowed woman named Rita. She will gift to her children roughly half her assets to spend down. Then she will apply for Medicaid benefits and will begin a penalty period at which time, the family will help pay for her care with the money she gifted them.

After the penalty period is over, Rita will be able to start receiving benefits from Medicaid and will save thousands of dollars per month on her care. To see the strategy with financial figures, read here.

Name on the Check Rule

The “Name on the Check” rule is a strategy where a couple spends down their assets by purchasing an IRA-MCA in the name of the spouse receiving care. However, the spouse that remains in the community will be the one actually receiving the monthly income from this IRA-MCA. 

Because the name on the actual check is only for the community spouse, the spouse receiving care will not be responsible for putting that money towards their care. It becomes another form of income for the community spouse while also allowing their partner to become Medicaid eligible.

Gift and Annuity

Gifting away assets will result in a penalty period, but, if done correctly, your penalty period will be minimal, you won’t lose all your assets and you’ll only have to pay for the full cost of care for a short period of time.

Medicaid Compliant Annuities are another way to spend down assets that allows aging individuals to save a larger portion of their excess assets while also allowing the individual that needs care, to receive care quickly.

Find out which strategy works best for you by using our free planning wizard which will outline your planning options within minutes! 


Medicaid Penalties

So what happens if you plan by yourself and you realize you’ve given away too many assets or have become ineligible for another reason? What penalties could you face?

The main penalty you will face is the penalty period which is a period of time that you will have to pay for your own care because you gave away too many assets within the five-year look-back period. This period can last a few months or can last many years, that is why it becomes vital that when you spend down your countable assets that you do so in a legal, Medicaid-compliant way.

Ultimately, Medicaid planning should be done as early as possible to allow for more freedom in handling assets and finances and more options for care. If possible, you will also want to contact a Medicaid Planner to guarantee that you are following appropriate guidelines for your state.


Medicaid Planning Resources

If you’re looking for more information in regards to Medicaid, Medicaid planning or other long term care planning, we have compiled a list of resources to help:

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