If your parents are beginning to experience the health issues often associated with aging, the time to begin Medicaid planning is now. Should they eventually require long-term care in a nursing home, Medicaid likely is the only way they will be able to pay its high costs.
Medicaid, however, has very strict eligibility requirements. For instance, an individual who applies for it must own a maximum of $2,000 in assets. This doubles to $4,000 for a married couple who apply jointly. Assuming your parents own their own home and at least one reasonably new vehicle, they are already well above this limit. What to do?
Medicaid spend-down
One solution your parents may wish to consider is doing a Medicaid spend-down. As reported by US News, this perfectly legal estate planning strategy consists of contacting an experienced estate planning attorney who can help them legally “spend down” their assets while complying with all state and federal laws, including the Medicaid laws. Often clients accomplish this by means of establishing an irrevocable trust into which they transfer their assets.
Look-back period
If a Medicaid spend-down appeals to your parents, the sooner they pursue this strategy the better. Keep in mind that Medicaid has a 5-year look-back period. This means that when your parents apply for Medicaid, officials will examine all of the asset transfers they made during the previous five years. Should they find anything that smacks of deliberate impoverishment, they likely will deny your parents’ application.
Consequently, your parents need to do their Medicaid spend-down properly and well in advance of their anticipated Medicaid application date.