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While many people know that long-term care is expensive, not everyone understands how to properly plan for those expenses. Medicare provides assistance, but it comes with strict income and asset stipulations. 

If you want to know how to avoid spending all of your money or getting rid of your assets to qualify for Medicaid, it’s important to know which strategies you can use to get the assistance you need without jeopardizing your future.

Why You Need to Protect Your Assets in Medicaid Planning

Older people wanting to enter long-term care without depleting their retirement assets often rely on Medicaid. However, because Medicaid is a means-tested program for which a person must have low income and little to no assets to qualify, those with significant amounts of money often have to pay out of pocket. 

This, in turn, means they have to take from their assets, which lessens what they can leave to their loved ones. Consequently, restructuring finances to ensure full qualification for Medicare benefits is necessary for those wishing to avoid this dilemma.

3 Ways to Protect Your Assets in Medicaid Planning

There are multiple ways you can restructure your finances to protect your assets when trying to qualify for Medicaid assistance. Here are three of the most popular methods older adults and their families tend to use.

1. Medicaid Asset Protection Trust

In Louisiana, the Medicare limit is $2,000 in assets and $2,829 monthly in income. While you can transfer your assets to a loved one, this comes with inherent risks if that person takes on debt that exposes your assets to creditor collection, has a major life change, or passes away while you are still alive.

A Medicaid Asset Protection Trust allows you to transfer your assets to the trust, which means they’re no longer in your name, and you are more likely to qualify for Medicaid assistance. These assets in the trust are not exposed to risk from debts or divorce and can still be transferred to your loved ones upon death.

2. Pooled Income Trusts

In Louisiana, disabled Medicaid recipients are allowed to “spend down” their excess income on qualifying care expenses to qualify each month for assistance. While this does ensure that Medicaid will pay for long-term care, it eats away at your assets.

Pooled income trusts (PIT) can help people qualify for Medicaid without having to part with their income. 

A non-profit entity pools income from disabled individuals in an irrevocable trust managed by the organization. The non-profit becomes a trustee and can disperse funds on the individual’s behalf. Upon the beneficiary’s death, any remaining PIT funds are sent to the state for reimbursement.

3. Medicaid-Compliant Annuity and Promissory Note

Usually, Medicaid has a “look-back” period of five years or 60 months. If a person transferred or got rid of a substantial amount of their assets during this period in an attempt to qualify for Medicaid, they will incur a penalty that requires them to pay for their own care until they spend down their assets enough to qualify for assistance.

Instead of spending down income, you can transfer some of it to a responsible family member. With fewer assets in your name, you have less to spend before you qualify for Medicaid. You can then purchase an annuity with the remaining money, which may provide you with enough income to cover LTC expenses during the penalty period. 

This solution still involves spending some of your own money. However, you’ll preserve more of it than if you had resigned yourself to spending down all of your assets to qualify or simply paying out of pocket from the start.

Let a Medicaid Planning Attorney Help You Execute Your Strategy the Right Way

Whether you use a trust, annuity, insurance, or another asset-saving method comes down to your individual situation, but help is available. Contact our Medicaid planning attorney at Kallio Law Firm in Prairieville, but serving all of Ascension Parish and the greater Baton Rouge area to learn more about your options so you can gain peace of mind about your future.