Rampulla & Newstad LLP

As Americans age, they may face failing health, and many of them turn to in-home caregivers or nursing homes for their skilled care. Both routes are expensive, and the cost of care is still on the rise. However, Medicaid is a federal program designed to provide health coverage for low-income individuals, including the elderly, offering assistance with medical costs such as nursing home care, hospital stays, and prescription drugs.

While there are income and asset limits to the Medicaid program, there exists a pervasive misconception that one must be extremely poor to qualify. Fortunately, Medicaid can provide a safety net for more of the population than it seems. There are ways to protect your assets for future generations including through trusts and other tactics, including “spending down” your assets rather than paying them to a nursing home.

Medicaid spend-downs offer a strategic pathway for individuals to qualify for Medicaid coverage. Contrary to widespread belief, spend-downs are not about impoverishing oneself; they’re about strategically reallocating assets to meet Medicaid’s eligibility thresholds.

One of the most effective spend-down tactics involves paying off debts, such as mortgages or outstanding loans. By reducing liabilities, individuals can convert at-risk assets into exempt assets, thereby lowering their countable assets for Medicaid purposes. This also means fewer debts for your loved ones to settle after your death.

Similarly, purchasing a vehicle can be a savvy spend-down strategy, as Medicaid typically exempts one vehicle from asset calculations. If you have an older vehicle, one way to spend money strategically is purchasing a new one. Although this just seems like spending your money, the important part is that your money now turns into an exempt asset, and you have this asset to pass on to your beneficiaries after death.

Another avenue for spend-downs is paying income taxes. By settling tax obligations in advance, individuals can reduce their countable income for Medicaid eligibility assessments.

Furthermore, investing in home improvements not only enhances quality of life but also reduces countable assets by increasing the value of the home. From accessibility modifications to energy-efficient upgrades, home improvements can be a prudent investment in both comfort and Medicaid planning.

Finally, prepaying for funeral expenses is a common spend-down tactic that not only relieves financial burden on loved ones but also reduces countable assets for Medicaid purposes. You may purchase a funeral for yourself, your spouse, and even other immediate family members including children, parents and in-laws. By setting aside funds for funeral arrangements, individuals can ensure a dignified farewell while strategically lowering their asset levels.

Through strategic Medicaid spend-downs, we empower our clients to navigate the complexities of Medicaid eligibility with confidence and foresight. Medicaid spend-downs offer a lifeline for individuals seeking to access long-term care services without depleting their savings. By employing tactics such as paying off debts, purchasing assets, investing in home improvements, and prepaying for funeral expenses, individuals can strategically reallocate their resources to meet Medicaid’s eligibility criteria. As you plan, remember that you don’t have to choose between financial security and Medicaid coverage. With the right guidance and expertise, you can unlock the doors to a brighter tomorrow while safeguarding your legacy for generations to come.