Safe Ways to Spend Assets So You Still Qualify for Medicaid

It’s an unfortunate reality that many people who apply for Medicaid end up discovering that they have too many assets to qualify for the program. Instead of being available to everyone, Medicaid is classified as a “needs-based” program and a successful applicant must be determined to have insufficient assets before the program will “kick in” and provide assistance. 

The process of reducing a person’s assets to qualify for Medicaid is also known as “spend-down”. Like many estate planning processes, many misconceptions exist about the “spend-down” process. For example, rather than only medical care, there are various things that a person can spend on without disrupting qualification for Medicaid. 

Allowable Spend-Down Categories

Some of the ways that a person can spend-down on assets without violating Medicaid’s look-back rule include:

  • Accrued debts, which might take the form of credit card balances, outstanding mortgage, and personal and vehicle loans
  • Annuities refer to lump sums converted into monthly income streams for a Medicaid applicant.
  • Home reparations and modifications utilized to improve access as well as safety within an existing home
  • Irrevocable funeral trusts encompass the costs associated with a person’s funeral and burial.
  • Medical devices that are not covered by insurance, which can include products like dentures, eyewear, and hearing aids 
  • Vehicle repairs, which might include replacing an engine, receiving a tune-up, or other measures taken to make sure that a vehicle runs properly

How to Protect Assets As You Spend-Down

Before you participate in the spend-down to qualify for Medicaid, there are some helpful strategies that you should consider to protect your assets, which include:

  • By transferring assets to an asset protection trust, assets transferred to the trust can later be distributed to loved ones at the time of your death with a “step up” basis to fair market value. This means that beneficiaries will avoid capital gains tax on the increased value of these assets that accrued during the trust creator’s lifetime. 
  • Medicaid enforces a strict income limit. If a person’s income is above this limit, it must be handled correctly so a person will continue to remain eligible for Medicaid. Both qualified income trusts and pooled income trusts are utilized to bypass these limitations.
  • A care agreement through which a friend or family members provide care in exchange for an income can be created to address services that are not covered by Medicaid.
  • Transfers between spouses are not subjected to Medicaid’s look-back period. New York also acknowledges “spousal refusal” which means that when a spouse refuses to provide support for the spouse who needs, the spouse needing care will immediately be considered eligible for Medicaid and receive services. 

Contact an Experienced Estate Planning Attorney

Medicaid is just one of many nuanced areas in New York estate planning law. Because each situation presents unique facts and the best strategy often depends on a variety of personalized factors, if you need help navigating the spend-down process, one of the best things that you can do is to retain the assistance of an experienced estate planning attorney. Contact Ettinger Estate Planning today to schedule a free case evaluation. 

Contact Information