You want to qualify for Medicaid, but your assets go above the predetermined thresholds. What now?
One option is to spend-down your estate. You need to eliminate some of the assets you control to get below the threshold.
There are numerous ways to do this, but many people simply gift them to family members or even close friends. For instance, if you have $300,000 in investments that put you over the limit, you could pull the money out and split it between your two kids, giving them each $150,000. Then you would qualify for Medicaid.
Another option is to put the money in a spend-down trust. This removes it from your estate and gives ownership to the trust instead.
One thing you need to remember is that you can’t reverse course on a lot of these decisions. Once the money is in the trust, it may be entirely out of your control. If you gift it to someone you thought was reliable who winds up using it in a way you did not approve of, you can’t demand it back.
For instance, perhaps you decided to gift it to a friend, with the idea that he or she would help you out financially if you needed it. Instead of keeping the money to do that, your friend bought a new house. Your money is gone and there’s nothing you can do.
It is very important to understand what legal options you have to reduce your estate as you do your long-term care planning, and you also need to carefully consider all possible outcomes.
Source: Investopedia, “4 Tips for Qualifying for Medicaid,” Mark P. Cussen, accessed June 15, 2018