Long-term care is one of the most significant financial challenges for aging Americans. Nursing home expenses can exceed $100,000 per year, quickly draining savings and retirement accounts. For those without robust long-term care insurance, Medicaid often becomes the primary option for covering these costs.
However, Medicaid eligibility requires strict income and asset limits. Many middle-class families find themselves with too much wealth to qualify for assistance and too little to sustain years of long-term care costs out of pocket. This is where strategic planning, including asset transfers, becomes essential.
What Does “Disowning Assets” Mean?
Disowning assets is not about abandoning wealth recklessly; it’s a legal strategy to restructure ownership so that an individual may qualify for Medicaid coverage. This can involve moving assets out of one’s direct ownership or converting them into exempt categories recognized by Medicaid.
Medicaid’s Look-Back Rule
Medicaid reviews an applicant’s financial history for the past five years, known as the “look-back period.” Any transfers for less than fair market value, such as giving away a house or a significant cash gift, can result in penalties and a delay in benefits.
This makes timing critical. Families who wait until a crisis often discover that they must spend down their assets before qualifying, while those who plan early can avoid penalties and preserve their wealth for spouses or children.
Legitimate Strategies for Reducing Assets
There are several legal methods families can use to meet Medicaid’s eligibility requirements:
- Medicaid-Compliant Annuities: Convert savings into a steady income stream that benefits a healthy spouse without disqualifying the applicant.
- Irrevocable Trusts: Transfer assets into a trust that cannot be altered, placing them outside the applicant’s countable resources.
- Home and Exempt Assets: Medicaid allows applicants to retain certain assets, including a primary residence (with limitations), personal belongings and one vehicle.
- Spousal Protections: The healthy spouse can retain a portion of assets under “community spouse resource allowances.”
Each of these strategies comes with unique rules and risks; as such, skilled guidance is essential.
The Role of Elder Law Attorneys
Elder law attorneys play a key role in navigating Medicaid eligibility. They assess each family’s situation, structure transfers and ensure compliance with federal and state laws. Without legal guidance, families risk costly mistakes that could delay or prevent Medicaid approval.
Attorneys also help protect the healthy spouse from financial hardship by securing income allowances and exempt property rights.
Weighing the Risks and Rewards
Disowning assets for Medicaid eligibility is not a one-size-fits-all solution. Families must weigh the ethical, financial and emotional considerations of restructuring ownership. For many, the alternative of losing an entire lifetime of savings to nursing home bills makes planning essential.
If your family is facing long-term care decisions, working with an elder law attorney can provide clarity and peace of mind. Proper planning ensures that your loved one receives the care they need without sacrificing your family’s financial stability.
Key Takeaways
- Medicaid has strict eligibility requirements: Families must meet specific income and asset limits to qualify for long-term care coverage.
- The five-year look-back matters: Transfers made too late can trigger penalties and delay eligibility.
- Legal tools can preserve wealth: Trusts, annuities and exempt assets help protect family resources, while meeting Medicaid rules.
- Skilled guidance prevents mistakes: Elder law attorneys ensure strategies comply with state laws and protect both the applicant and the healthy spouse.
Reference: Barron’s (Feb. 13, 2025) “Should You Disown Your Assets to Get Medicaid Long-Term Care? What to Know.”