Medicaid provides healthcare coverage for those who might not have access to it. However, individuals need to meet certain financial and medical eligibility criteria.
Many people are unaware that after receiving Medicaid benefits, the program may attempt to recover costs through the Medicaid Estate Recovery Program (MERP). With that, your assets, including your home, are at risk.
Let’s see how to protect your home from Medicaid and the steps you need to take to protect your other parts of your estate from these recovery efforts.
What Is Medicaid Estate Recovery?
Medicaid estate recovery can be a major surprise to beneficiaries and heirs. After the recipient passes away, Medicaid may seek reimbursement for benefits paid on their behalf. These include nursing home care, home and community-based services, and related prescription costs.
The program will look to recoup its expenses and target assets within the deceased’s probate estate. These can include any property held solely in the individual’s name, such as a home, bank accounts, or investments.
Fortunately, there are strategies to shield these assets from recovery while preserving Medicaid eligibility.
Strategies to Protect Your Assets
The thought of losing assets can be scary for many people. However, you can take a few steps to protect them from the Medicaid recovery process.
Establish an Irrevocable Trust
An irrevocable Medicaid Asset Protection Trust (MAPT) is one way to protect your assets. When you place them into this type of trust, they no longer legally belong to you. As a result, Medicaid cannot count them as part of your estate for recovery purposes. But you need to plan ahead.
Medicaid enforces a five-year look-back period. So, any assets transferred to an irrevocable trust within five years of applying for Medicaid may still be considered part of your estate.
Home Ownership Transfers
For most people, the family home is their most valuable asset. You may want to consider transferring ownership of the house to protect it from Medicaid recovery. One way is with a life estate deed.
With that, you can transfer ownership of your home to a beneficiary while retaining the right to live in it during your lifetime. Upon your death, the home passes to the designated beneficiary and avoids probate.
Another solution is to give the home to your children or other heirs. However, this strategy requires careful planning to avoid the five-year look-back period and potential tax consequences.
Spend Down Assets
If you want to qualify for Medicaid, you must meet strict income and asset limits. For many, they choose a “spend down” strategy. This can reduce assets while enhancing their quality of life. Some of these examples include:
- Prepaying for funeral and burial expenses
- Paying off debts, such as mortgages or credit cards
- Upgrading your home or vehicle
Once again, you need to precisely execute these plans. Otherwise, you could face serious penalties and problems with the Medicaid rules.
Get Long-Term Care Insurance
Sometimes, purchasing long-term care insurance can help cover the costs of nursing home care or in-home services. As a result, that can reduce or eliminate the need for Medicaid. These premiums can be costly. However, purchasing this coverage early in life can make it more affordable and provide peace of mind.
Reach Out to an Estate Planning Lawyer
Medicaid rules are complicated, and if you make a mistake, it could put your assets in jeopardy. Working with an experienced estate planning lawyer in Wisconsin makes sure that your asset protection plan complies with state and federal regulations.
Protect Your Assets with These Strategies
Hopefully, with these steps, you know how to protect your home from Medicaid. However, it can be tricky to find the right solutions for your needs by yourself. For that reason, we offer personalized plans to safeguard your assets from any recovery efforts.
If you are looking for help with your planning, reach out to the legal team at Collins Law Firm. We offer estate planning, estate administration, business law, and elder law services. We proudly serve Southeastern Wisconsin and the Milwaukee area. Contact us or call (414) 207-6292. Schedule your free and confidential consultation today!