Medicaid

What’s an asset protection trust? What’s a Trust?    Watch the video on Asset Protection from Medicaid   Like this video? Subscribe to our channel.   The Deficit Reduction Act of 2005 established a June 30, 2006 deadline for the Secretary of Health and Human Services (HHS) to release regulations for states to come in compliance with the new severe new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care.   The law extends Medicaid’s “lookback” period for all asset transfers to 5 years, it was originally 3 years and changes the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters the nursing home.   Qualification to enter the nursing home is achieved when the individual is out of funds, meaning he/she cannot afford to pay the nursing home. The new federal law applies to all transfers made on or after the date of enactment, February 8, 2006. Any transfer made before February 8 falls under the old transfer rules. Exact enactment provisions are state by state, but it’s clear that non-compliance by 50 state legislatures puts their federal funding at risk.   You can protect yourself from the Medicaid nursing home care by taking action now while you still have your health.   You can reposition (transfer) your assets from you to an irrevocable trust with a truly independent trustee. The key is the “Independence of your Trustee.” The trustee cannot be any-one related to you by blood or marriage. And, you must be willing to give-up complete control over your assets. This lack of perceived control is the most difficult to achieve. Seniors have a deep sense of independence by their ability to control and manage their assets.   Revocable or irrevocable trust, what’s that mean? Revocable is when the original person with the assets transfers (repositions) the assets to a trust with strings attached. The tax lingo is “grantor-type trust. The “strings” when the original grantor (person with the assets) elects himself as the trustee, and the beneficiary of the trust. The grantor, the trustee, and the beneficiary are the same person. Effectively you have kissed yourself on the hand and blessed yourself as the pope. This simply will not work. Period.   An irrevocable trust is when the grantor (the person with the assets) gives-up complete control to an independent trustee who in turn will use his judgment as trustee to manage the assets for the beneficiaries of the trust. The fiduciary relationship of the trustee is to the protection of the assets at any cost. The trustee must protect and must diligently invest under the prudent man rules, he cannot ever deal for himself. The courts do not look favorably on dereliction of duties while serving as trustee. An irrevocable trust is the only significant asset protection device for avoiding the Medicaid spend-down provisions.   Asset protection from Medicaid requires foresight and a strong conviction to walk away from perceived control. Inaction is devastating. Seniors must use all their funds first, then qualify for the nursing home. It’s clear, that these new rules are designed to impoverish the healthy spouse.        

What’s an asset protection trust? What’s a Trust?    Watch the video on Senior Medicaid Asset Protection   Like this video? Subscribe to our channel.   As tax preparation time begins, many seniors are asking to include Medicaid asset protection as part of their tax planning strategies. For those of you not familiar with the 2005 Tax Reduction Act, some of the provisions address specific transfers by seniors under the new Medicare nursing home provisions. Under the new provisions, before a senior qualifies for Medicare assistance into a nursing home, they must spend-down their assets. These new restriction have a 5 year look-back, used to be 3 years. And used to be that each spouse had a one-half interest in the marital property, it now appears that all the marital assets are to be spent-down. I have not seen specific regulations but it appears that the healthy spouse will be left without any assets if one of them gets sick.   Suggestions by seniors have been to transfer their assets to their children. Although this option is available, I’m not sure that it’s a good option. What if the child decides to use the asset for themselves, what if they get divorced and the judge awards assets originally intended for the parents to the divorcing wife’s decree, what if the child get’s sued?   There are also tax implications. If the assets are transferred to the child for less than fair market value, then it’s a taxable gift. Even worse, if this type of transfer to the child is completed before the 5 years-look back, is it a “fraudulent conveyance?”   Medicaid asset protection has to be done very carefully. Planning in this area is evolving. There are a lot of eldercare law firms popping up all over the place. I have been approached by such a firm to send them clients. They claim that they can structure a new deal whereby the nursing home won’t be able to attach assets even after they enter the nursing home.   I know this much, any method used to deflect assets from the original owner has to be done at it’s fair market value. For example you just can’t transfer your house from you to your child. There are tax consequences. Did you just sell your house? Or did you just gift your house? Who will determine the fair market value? Did you get a genuine appraisal? If therefore, it’s at less than fair market value (willing buyer and willing seller, neither under compulsion to buy or sell, each acting in their best interest) did you just create a more challenging problem?   Any method whereby there’s an element of strings attached, it’s revocable and therefore you have done nothing to disassociate yourself from your asset. One can challenge your intent, to divert assets for the purpose of defrauding a potential creditor and failure to have filed a gift tax return has statutory penalties, and interest, worse- if Medicare intended, criminal?   I am aware of only one method of disassociating yourself from your asset (personal residence, your CD’s, your investments, vacation spot) is to give it away. Period. You can gift it to your children, pay the tax and that’s it. The problem is that you no longer have any control and you are at the mercy of your child’s good intentions and a blessed spouse. Risky? You bet!   An irrevocable trust with an independent trustee (not related to you by blood or marriage) will fit the bill. An irrevocable trust, is an irrevocable contract between you and the independent trustee to manage the assets for the benefit of all beneficiaries. You and your spouse can become beneficiaries along with your children and grand children.   Timing is extremely important. If the transfer (repositioning) of your valuable assets is done before the 5 years, chances are good that it will stand-up in court. What if it’s before the 5 years are up? Is your Medicaid asset protection plan still good? In my book it’s better to have done something than nothing.        

   Watch the video on Hide My Assets from Medicaid 3 quick tips   Like this video? Subscribe to our channel.   What Seniors Ask Me About Medicaid and Asset Protection   At social gatherings, the question always comes up:   “How do I qualify for Medicaid without losing everything?”   Seniors are deeply worried with regard to spending of their assets mandatorily. They may be forced to spend up an unlimited amount. Nursing home assistance is only available thereafter. Fear and also financial insecurity result for such healthy spouse. It often triggers guilt along with depression for the sick spouse because getting sick wasn’t a choice.   This Generation Was Built on Sacrifice   These individuals are members of the Greatest Generation those who lived through World War II or survived the Great Depression. Their mentality is simple:   “If you cannot pay with cash, you do not buy it.”   Credit cards mostly came later in life. The reason was usually for mail-order prescriptions. They face their entire life savings evaporating now to afford basic long-term care after always living frugally.   Why It’s About More Than Money   For many of these seniors, it brings about emotional security because they can still access their funds. It is about being able to buy necessities or give money to grandkids instead of only nursing homes.   This generation does include even my own mother. My children visit her. This brightens up her entire day now. It means everything when she gives to them a little cash a gesture of love and appreciation not to bribe them to come back.   In a fast-paced world of iPods, TikTok, and 5G speed, she knows her grandchildren made time for her. That means more than money could ever buy.   Asset protection isn’t just legal strategy—it’s preserving dignity, independence, and the ability to love generously.   How Do I Hide My Assets from Medicaid Then?   It’s one of those most frequently asked questions that I obtain from all of their families and from worried seniors:   “Thus, how do I conceal my assets?“ This question concerns Medicaid.”   The question exists including deep relations to their lives. Here is also the most honest answer.   Anything you try to do now could be flagged as a fraudulent conveyance if you didn’t take action at least five years ago, because it is a transfer intended to defraud a potential creditor, in this case, Medicaid.   What Is a Fraudulent Conveyance?   Let’s say you add your son or daughter to your home’s deed without receiving fair market value in return. That would likely be classified as a fraudulent transfer. Why? Because:   • You gave away the asset below market value   • You received no compensation   • You did so within Medicaid’s 5-year look-back period   Even if your intent was harmless or for convenience, Medicaid views the action as an attempt to hide assets—and they can penalize you by delaying or denying care coverage.   To learn more about irrevocable trusts and senior elder care visit:   It’s Also a Taxable Gift   Many families don’t realize this:   Giving away a house is considered a taxable gift. That means:   • The donor (you) is responsible for filing a Gift Tax Return (Form 709)   • The recipient (your child) receives the property after taxes, but the value still counts toward your lifetime gift exclusion   Most people don’t even consider these implications. They make these transfers for convenience, not understanding the tax or Medicaid consequences until it’s too late.   Restrictive Medicaid Spend-Down Provisions   The new Medicaid spend-down rules are more aggressive and restrictive than ever. The clear message is this:   If you have assets before applying for nursing home assistance, you must first spend them down—until you qualify as a welfare recipient. And that’s exactly what many seniors fear the most.   A Generation Built on Dignity, Not Dependency   This isn’t just a policy issue—it’s a deep emotional insult to the Greatest Generation. These are individuals who:   • Survived the Great Depression   • Fought or rebuilt after World War II   • Never asked for help if they had a strong back and a will to work   To them, becoming a “welfare recipient” is more than financial hardship—it’s a loss of dignity. It’s a concept that humiliates, not helps.   They worked hard, saved faithfully, and lived within their means. And now, in their most vulnerable years, they face the prospect of seeing everything they built systematically drained—not for luxury, but just to receive basic care.   There Is a Better Way   Proper planning—especially with the right trust structures—can protect seniors from this devastating financial erosion. Medicaid planning is not about hiding wealth. It’s about preserving dignity, choice, and legacy.     Common Mistakes Seniors Make When Trying to Hide Their Assets   In an attempt to qualify for Medicaid or protect wealth, many seniors unintentionally create new legal and financial risks by making misguided moves. Here are some of the most common—and dangerous—mistakes:   1. Adding Children to Financial Accounts   Seniors often name their child as a co-owner:   (Parent’s name “and/or” Child’s name) on savings, checking, or investment accounts.   THIS IS NOT A GOOD IDEA.   Why? Because if your child:   • Gets sued,   • Goes through a divorce, or   • Passes away prematurely—   then your assets could be lost or entangled in someone else’s legal drama. You’ve just opened a new can of worms.   2. Gifting the House to the Children   Many parents title the home in their children’s names. Again—not a good move. Why?   • The child could be sued or file bankruptcy.   • Divorce proceedings could split the asset.   • If the child dies, the home may pass to unintended heirs or get taxed.   This strategy creates more risk than