Gift Giving & The Medicaid Spend Down

When you are making plans for the latter stages of your life from a financial perspective it is important to keep yourself aware of all the costs that you may encounter and the options that are available to you to react to them. Long-term-care expenses are indeed a source of concern, and though Medicare does not cover these costs Medicaid can if you can meet the financial eligibility requirements.

Medicaid is theoretically intended as a program to provide medical care to people who cannot afford it, so you must have limited assets to become eligible. The ultimate goal would be to optimize the assets that you have while making long-term plans for achieving Medicaid eligibility if this is something that you want to or need to accomplish. Since you can only have $2000 in total assets and still qualify for Medicaid (this excludes your place of residence, your vehicle, and your personal possessions) many people engage in what is called a “spend down” strategy in an effort to become eligible for Medicaid.

One very direct and efficient way of spending down your assets would be to give them away to those who would otherwise be inheriting them after you pass away. This make sense, but you have to plan well in advance because there is a 60 month Medicaid “look back” period in place. Any gifts that you give within five years of applying for Medicaid can result in a penalty. For example, if the average cost of long-term care in the state within which you reside is $10,000 per month and you have given gifts equaling $100,000 within five years of applying for Medicaid, you would be ineligible for 10 months.

Spending down in an effort to become eligible for Medicaid can be the right choice for some people, but the right way to approach it can be complex so it is probably a good idea to reach out to an elder law attorney to assist you before you begin the process in earnest.

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Alan Augulis, Estate Planning Attorney

Mr. Augulis founded his Warren, New Jersey law firm so that he could focus his practice in the areas of advanced estate planning and tax law. Mr. Augulis has invested considerable time and energy helping to educate others on the topic of estate planning and has become a sought-after speaker in the tax and estate planning arena because of his informative and entertaining seminars.

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