How Adult Children Can Protect a Parent’s Assets During a Medicaid Crisis

When a parent suddenly needs nursing home care, adult children often find themselves stepping into an unfamiliar role. In addition to making decisions about care, you may be sorting through bank statements, insurance policies, property records, and years of financial information—all while worrying about how quickly your parent’s savings could disappear.

If your parent may benefit from seeking Medicaid eligibility to pay for long-term care, acting quickly is important. But protecting a parent’s assets during a Medicaid crisis isn’t about simply moving money out of their name. In fact, doing so without understanding the rules can make matters worse. Here are some of the most important steps adult children can take to help protect a parent’s finances while working toward Medicaid eligibility.

Read More: Get Fast Financial Relief When Nursing Home Costs Are Draining Your Savings

Get a Complete Picture of Your Parent’s Finances

Before making any financial changes, determine exactly what your parent owns and receives. Gather information about:

• Checking and savings accounts
• Investments and certificates of deposit
• IRAs and other retirement accounts
• Social Security and pension income
• Life insurance policies
• Real estate
• Vehicles
• Annuities and trusts

Some assets may count toward Medicaid’s resource limit, while others may be exempt or treated differently under state rules. A complete financial inventory can help identify which assets actually present an eligibility issue.

Don’t Start Giving Assets Away

When families discover that a parent has too many assets to qualify for Medicaid, transferring money to children may seem like an obvious solution. Unfortunately, gifting assets can create serious eligibility problems. Medicaid generally reviews certain transfers made during the five years before an application for long-term care benefits. Giving away money or transferring property for less than fair market value during this five-year lookback period can result in a penalty period during which Medicaid will not pay for care. Before transferring any asset, make sure you understand how the transaction could affect eligibility.

Read More: What to Do When Your Parent Suddenly Needs Long-Term Care 

Look for Medicaid-Compliant Ways to Reduce Assets

Having excess assets does not necessarily mean your parent must simply spend everything on nursing home bills. Depending on the circumstances, funds may be used for legitimate expenses that benefit your parent. Examples might include paying outstanding debts, purchasing necessary personal items, making certain home improvements, or arranging allowable prepaid funeral and burial expenses. They may also fund a Medicaid Compliant Annuity (MCA) to preserve assets for their healthy spouse or for future generations. The goal is to reduce countable assets in a way that complies with Medicaid rules while using your parent’s resources as effectively as possible.

An MCA converts a lump sum of assets into an income stream while meeting specific Medicaid requirements. However, not every annuity is Medicaid compliant, and an MCA must meet specific requirements. This is one strategy families should explore with an experienced professional rather than attempting on their own.

Make Sure You Have Authority to Act

Adult children do not automatically have the legal authority to manage a parent’s finances simply because the parent needs care. Review whether your parent has a valid financial power of attorney and what authority that document provides. If your parent still has the capacity to make decisions but does not have the appropriate documents in place, addressing the issue promptly may make future financial and care decisions easier. An elder law attorney can help determine what legal authority is necessary based on your family’s circumstances.

Take the Next Step

If your parent is already in a nursing home or will need long-term care soon, our team can help you understand your options and develop a plan designed to protect eligible assets while working toward Medicaid coverage. Tell us about your situation to get started.