Estate planning is important when it comes to protecting your assets from Medicaid recovery. Being aware of a few strategies to follow can help you safeguard your assets for your heirs.
What is Medicaid asset recovery?
Medicaid asset recovery is a process by which the state can collect repayment for benefits paid on a person’s behalf. This is somewhat common for nursing home care or home-based health services. It may happen after a Medicaid recipient passes away. The state typically targets assets like houses, property, or bank accounts. However, there are legal ways to protect these assets through estate planning.
How estate planning can protect assets
Estate planning offers several tools to help avoid Medicaid asset recovery. These methods, when executed correctly, can keep your assets out of the state’s reach. Certain types of trusts, like irrevocable trusts, allow you to transfer ownership of your assets. This way, they no longer belong to you legally and Medicaid can’t recover them after your passing.
A life estate deed allows you to retain the right to live in your home while passing ownership to another party. Ownership usually goes to a family member upon your death. This transfer prevents Medicaid from claiming the property. Finally using assets for allowable expenses, such as home improvements or paying off debt, may reduce the amount subject to recovery.
Timing matters
Medicaid has a five-year “look-back” period. This means any asset transfers or certain financial decisions made within five years of applying for Medicaid may be examined. In some cases, these properties could still be subject to recovery. As such, it’s important to start estate planning early to make sure your strategies work.
Looking ahead
Estate planning cannot completely eliminate the potential for Medicaid recovery. It does, however, greatly reduce the risk and protect key assets. The earlier you begin planning, the more options you have to shield your estate from being depleted after your death.