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4 ways to protect assets when applying for Medicaid

Did you know that, according to the Centers for Disease Control and Prevention, more than 1.5 million Americans are currently in nursing homes? And this number is only going to increase as baby boomers get older and require more long-term care.

With this in mind, it can be wise to start thinking now about how you might pay for long-term care in the future. One way to do this is with Medicaid. However, to quality for Medicaid, you must fall under certain asset and income limits. Instead of spending down your assets to qualify, you might want to consider some of the following options to preserve assets.

  1. Set up a trust. As this Investopedia article explains, establishing a trust and transferring ownership of property to that trust can help protect property. Depending on the type of trust, it could shelter assets without adversely affecting a person's Medicaid eligibility.
  2. Give gifts now. If you plan to give property or money to your children or others, you might consider doing so sooner rather than later. If you wait, you could wind up facing penalties due to the look-back period, which is the five years before applying for Medicaid.
  3. Draft an annuity. Annuities can provide a steady stream of money to recipients. And when they are drafted properly, certain annuities can help Medicaid applicants meet eligibility requirements without penalties. Again, though, annuities must meet several criteria to be effective tools for avoiding transfer penalties.
  4. Have a personal care agreement. If you anticipate having a family member or other loved one caring for you in your home or theirs, you should have a caregiver agreement in place before personal care begins. This agreement and the subsequent documentation can be crucial in avoiding penalties when a person applies for Medicaid because it shows that the applicant received care services for payment, as opposed to being a financial gift to a loved one.

Too many people wrongly assume they are ineligible for Medicaid or must spend down their assets to qualify because they do not meet income requirements. The fact is that with careful planning and proper tools, it can be possible to preserve assets and avoid excessive penalties.

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