Most people who are considering the potential need for Medicaid benefits to cover long-term care have the misconception that becoming eligible means giving away all of your property to your family. The unfortunate reality is that there are laws meant to discourage people from doing just that. The rule is that if you transfer any assets within five years of your application for Medicaid benefits, it is likely that your benefits will be delayed for a certain “penalty period.” The good news is, there are strategies that your Kansas City Medicaid attorneys can show you how to use so you can protect your assets and still maintain your eligibility.
Understanding how Medicaid will categorize your assets
When Medicaid determines peoples’ eligibility for long-term care benefits, it will divide their assets into one of two categories – countable or exempt. Countable assets are assets that can be used to provide for your care prior to receiving Medicaid benefits, such as cash, bank accounts, retirement accounts, securities and the cash surrender value of any life insurance policies. On the other hand, your exempt assets are those that are not considered to be used for providing care, such as your home and a vehicle. However, even exempt property may be subject to Medicaid recovery upon your death.
What are the income limits for Medicaid eligibility?
Under the Affordable Care Act, effective January 1, 2014, Medicaid eligibility has been expanded to individuals under the age of 65 who have an income of no more than 133 percent of the federal poverty level. For an individual, the federal poverty level is $12,060.00. That would mean, to be eligible for Medicaid your income cannot exceed $16,039.80.
What are the asset limits for Medicaid eligibility?
Single individuals are also allowed to have up to $1000 in Missouri or $2000 in Kansas in cash and investments, along with their primary residence, if they plan to return to that home when they no longer need long-term care. The remainder of their income will be applied to the cost of their long-term care expenses. It works a little differently for married couples. The healthy spouses who are still living at home are allowed to keep the home, a vehicle, and their own personal property. Depending on the limits in your state, the healthy spouse will be able to keep an additional amount of cash and investments as well.
Using your assets to pay off debts
One of the best strategies for protecting your assets, recommended by Kansas City Medicaid attorneys, is using your countable assets to pay off your debts. If through your Medicaid planning, you can pay off your mortgage or other large debts, or prepay your real estate taxes, then you can make the most of your assets and protect them from Medicaid recovery.
Using your assets to buy exempt assets
One thing that Medicaid does allow is using your countable assets to purchase exempt assets of equivalent value. So, for instance, the healthy spouse can use money from the couple’s countable savings to buy a more expensive home or make improvements to the existing home. The healthy spouse could also buy a new vehicle or household furnishings.
Converting countable assets to income
Kansas City Medicaid attorneys can also recommend certain strategies for converting your countable assets into income that can be used by the healthy spouse. Basically, the healthy spouse must receive something of equal value in return for the converted assets.
One of the most common strategies is converting your assets into an annuity which can provide a stream of income over a specified period of time. It is important to remember that only specific types of annuities will conform to Medicaid law. The healthy spouse can spend any income they receive from the annuity or reinvest that income. Essentially, the healthy spouse is able to recover all of the assets that were used to purchase the annuity.
Why are there penalties for asset transfers?
Unfortunately, some people anticipate needing long-term care in the future, but they don’t want to give up all of their assets in order to qualify for Medicaid benefits. So, they give away many of their assets to relatives in order to reduce the value of their estate. Well, Medicaid does not look favorably on this because those assets could have been used to pay for their own care.
Understanding the rules about property transfers
The 2005 Deficit Reduction Act allows the Medicaid agency to impose a period of ineligibility if you transfer your countable assets at any time during the five years prior to applying for Medicaid benefits. An “asset transfer” includes gifts, donations to charity, the sale of property for less than fair market value, and debt forgiveness. The length of any imposed period of ineligibility depends on the value of the property that was improperly transferred. This is where proper Medicaid planning comes in, so discuss your options with our Kansas City Medicaid attorneys.
If you have questions regarding asset protection or any other Medicaid planning issues, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!
- Hulk Hogan and Disclaimers…? - September 1, 2025
- “Let’s Go Crazy” … Over Prince’s Estate - September 1, 2025
- Who Should Act as Your Trustee? - July 20, 2020
