Medicaid Planning Strategies: Simple Approaches to Help Qualify

Last updated: June 27, 2018

There are many income and asset planning techniques used to qualify for Medicaid when one is over the limit(s). Some are exceedingly complex, while others are surprisingly simple. Our intention is not to include them all here, but to include those that are relevant to individuals looking for the most affordable way to qualify for Medicaid. Most of the techniques described below can be undertaken with little to no financial or legal assistance. One can also find the most affordable option for getting planning assistance.

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Asset Planning Strategies

Irrevocable Funeral Trusts
These are trusts set up for the purpose of paying for the Medicaid applicant’s funeral in advance. For applicants who have assets exceeding the countable limit, establishing an irrevocable funeral trust can reduce their countable assets by up to $15,000 (or up to $30,000 for married couples). At the same time, setting up this type of trust prevents one’s family members from having to shoulder the financial burden of a burial. The process of establishing an irrevocable funeral trust is fast, simple, and no legal fees are required. Unfortunately, this technique is not allowed in Michigan and New York.

*Caution* they are many other options available to pre-pay for a funeral that sound similar, but aren’t Medicaid exempt. Use the form below to find Medicaid-exempt, irrevocable funeral trusts offered in your area.

Spousal Asset Transfers
When only one spouse of a married couple is applying for nursing home Medicaid, certain spousal protections apply to ensure the community spouse (the spouse who continues to live at home) does not become impoverished. In 2017, the community spouse, also referred to as the well spouse, is permitted up to $120,900 in countable assets (in most states), while the Medicaid applicant is only allowed an approximate $2,000. The amount of assets that the well spouse is able to retain, which includes mutually held assets, is called the Community Spouse Resource Allowance (CSRA). This allowance can effectively lower the applicant’s resources, hopefully to a Medicaid compliant level. This common technique is fairly simple, encouraged by Medicaid, and should require little to no outside assistance.

For married couples in which only one spouse is applying for nursing home Medicaid, an annuity is a good option. This planning technique turns countable assets into non-countable income for the “well” spouse. In simple terms, a lump sum of money is paid to an insurance company, which in turn, will pay the healthy spouse a monthly payment. Annuities must be irrevocable, and the monthly payments must not exceed the life expectancy of the well spouse. Spousal annuities are not an option in all states.

Spend Down Excess Assets
There are several ways in which one is able to spend down assets in order to reach the Medicaid asset limit. Options include home modifications and improvements, such as adding a chair lift or putting on a new roof, purchasing medical devices that are uncovered by insurance, like dentures, and paying off one’s mortgage or credit card debt. It’s important to note, one may not give away assets or sell assets way under market value, as this may result in a period of Medicaid ineligibility.


Income Planning Strategies

Spousal Income Transfers
A similar technique to the one mentioned above for asset planning can be applied to a married couple’s income. The non-applicant spouse or “well spouse” is permitted to maintain sufficient income to enable them to continue living at home. This is called the minimum monthly maintenance needs allowance or MMMNA. In 2017, the well spouse is permitted to maintain a maximum of $3,022.50/ month in income. Joint income can be allocated to or claimed by the well spouse, which effectively lowers the Medicaid applicant’s monthly income. This technique, which is encouraged by Medicaid and is commonly utilized and is fairly straightforward, should require little to no outside assistance.

Qualified Income Trusts / Miller Trusts
For individuals who are not married or whose spouse’s income exceeds the MMMNA, Qualified Income Trusts (QIT) offer another, slightly more complicated technique for helping the applicant to meet the Medicaid income limit. Income over the limit is allocated into a qualified irrevocable income or Miller Trust, and is generally used to pay one’s medical bills and care. Often, the remaining money becomes the property of the state after the Medicaid applicant passes. However, typically these accounts are set up for just a few hundred dollars to be directly deposited each month, which in turn, allows the applicant to qualify for Medicaid and receive many thousands of dollars in care and support each month. QIT / Miller Trusts are not allowed in all states.

*More content will be added to this webpage as scheduling permits.

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