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A Medicaid professional consultant helping an elderly woman to protect her assets and money from the nursing home spend down.

Medicaid Asset Protection Planning

Good Medicaid planning to protect your assets from the Medicaid spend down

Importance of Medicaid Asset Protection Planning

In Medicaid asset protection planning, seniors now have one more thing to worry about. The government requires seniors to spend down all of their assets before they can be eligible for Medicaid to cover the cost of a nursing home. This is a great concern for many seniors. They worked their entire life to earn what they have, and now it is going to be taken away. There are ways to protect those assets.

New Medicaid Laws When Transferring Assets Before Entering Nursing Home

The tax season is fast approaching. During this time, seniors often ask if they can include their Medicaid asset protection in their current tax strategies. In 2005, the Tax Reduction Act included provisions that address transfers of assets made by seniors. Under new laws, all seniors who are applying for Medicaid to cover the cost of a nursing home must spend down their assets. There is currently a period of five years in which these assets cannot be repositioned or transferred without incurring some Medicaid penalty. This is referred to as the look-back time. The new provisions also state that all marital assets must be spent down. This means that if your spouse gets sick and needs to be placed in a nursing home, you will be left with no resources on which to live.

Transferring Assets in Medicaid Asset Protection Planning

When it comes to Medicaid asset protection planning, seniors sometimes question whether they should transfer all of their assets to their children. This can be done, but it is a high risk. If something happens to your children, such as divorce or law suit, they may make use of your assets to help their own situation. At an average rate of over 50% who are ending up in divorce this is a high risk indeed. There are far too many risks in doing this, so it is not a recommended way to reposition your assets. In addition, there are some tax issues to consider when transferring assets to your children. You will be responsible for paying any gift tax if the assets were transferred at less than the fair market value. No matter how you transfer your assets, if the act is done within the five year look-back period, it may be considered fraudulent conveyance.

Other Methods to Protect Assets in Medicaid Asset Protection Planning