Liquidating assets before
Transfer a portion of your monthly income to your spouse.
The Federal Spousal Impoverishment Act protects the spouses of nursing home patients by permitting them to exclude their own income when paying for a spouse's nursing home care.
Testamentary trusts, which only become active after your death, can protect assets from your beneficiaries' creditors.
However, living trusts, created during your lifetime, only provide protection from lawsuits against you if the trust is irrevocable.
Nursing homes provide a valuable service for elderly and disabled individuals who cannot adequately care for themselves. The American Association of Retired Persons reports that the typical nursing home stay costs an average of ,000 a year.
Many elderly individuals mistakenly believe that Medicare will cover their nursing home stay.
Medicaid, a federal insurance program for low-income individuals, will cover nursing home care, but you may not be able to qualify for that care until you have exhausted your existing assets.
Of course, there’s no way to know with certainty if or when you will need nursing home care, but giving gifts to your family members well ahead of time helps protect the money from creditors seeking to collect after your death.
In the case of Medicaid, any assets you transfer within the five years prior to entering a care facility are subject to seizure after your death.
Thus, you can transfer your assets into an annuity and qualify for Medicaid-covered nursing home care without having to spend down your assets.
If your state does consider annuity payouts when determining Medicaid eligibility, you can still safely transfer assets into an annuity, but you cannot use Medicaid's services for a specific period of time following the transfer.
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The goal of forming an irrevocable Medicaid trust is to allow the trustor to keep her assets for her heirs while still qualifying for Medicaid insurance coverage for long-term medical care later.