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Asset protection in long-term care planning requires foresight

On Behalf of | Jun 1, 2017 | Wills

Many people residing in California will prepare for the possibility of future long-term care assistance by directing that the expenses of that assistance be paid by federal Medicaid. However, the desire for that method of asset protection is easier said than done. That is because Medicaid has a myriad of qualifying rules that must be met to be qualified for coverage.

One major requirement is that a person’s financial net worth must be less than $2,000. Secondly, the person must not have given away anything of significant worth in the last five years prior to death. It is typical for household items and belongings to be valued at garage sale amounts, making that part of the formula relatively easy to meet.

It is more difficult to protect real estate and high-value assets from the Medicaid qualifying rules. In effect, these assets must be transferred from ownership over five years from the date of the person’s death. There are some tools recognized by estate planning and elder law attorneys to save the person’s major assets, but the client must start as early as possible to avoid the five-year rule.

One method involves simply giving away assets where feasible. Gifts are irrevocable and cannot be taken back. One pitfall in gifting is that the donee may incur large capital gains taxes in the future. Another major strategy is for the owner to retain a life estate in real estate while deeding the fee simple ownership over to the heir or family member. This may involve complexities and should not be tried without the services of an experienced legal counsel.

Another tool for asset protection in California and elsewhere is an irrevocable trust, sometimes called a “Medicaid Trust.” To prepare a qualified trust, the owner will do best by obtaining the services of an attorney who is experienced in Medicaid eligibility planning. The value of these methods depends on how early one puts these strategies into effect. Generally, this must be done as soon as possible, but persons in all age categories should examine these remedies before ruling out any potential options.

Source:, “Legal-Ease: Asset protection from nursing home expenses“, Lee R. Shroeder, May 27, 2017


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