Medicaid Planning: Strategic Asset Protection Without Losing Control

As an estate planning attorney in Bexar County, I've seen how proper Medicaid planning can make the difference between preserving a family's legacy and depleting their life savings on long-term care costs. Medicaid planning remains one of the most powerful tools available to protect assets while ensuring eligibility for vital benefits. Let's explore some strategic approaches that allow you to protect assets without surrendering control.

## Understanding Medicaid Eligibility

Before diving into strategies, it's important to understand that Medicaid is a means-tested program. This means that both income and assets are evaluated when determining eligibility. For many Texas families, the challenge isn't income qualification but rather meeting strict asset limits. Single applicants generally can't have more than $2,000 in countable resources, while married couples face different limitations depending on whether one or both spouses need care.

## The Power of Exempt Assets

One of the most effective Medicaid planning strategies involves converting non-exempt (countable) assets into exempt assets. Texas Medicaid rules provide several categories of exempt assets that don't count toward eligibility limits:

### 1. The Homestead Exemption

Your primary residence is typically exempt regardless of value (though equity limits may apply in certain circumstances). What many people don't realize is that the homestead exemption extends beyond just your house.

According to Texas Medicaid rules, "all land adjacent to the home" can qualify for the homestead exemption. This includes any land that isn't separated by intervening property owned by another person. Even land separated by roads, rivers, or streams may qualify as "adjacent."

Most importantly, adjacent land doesn't need to be purchased at the same time as the original homestead. It can be "contained in a separate deed or conveyance at a time different from the purchase of the original homestead." This creates a strategic opportunity to protect liquid assets by purchasing adjacent property.

### 2. Burial Plots as Asset Protection

Another effective strategy involves purchasing exempt burial plots with non-exempt liquid resources. Since burial plots are considered exempt assets, this effectively transforms countable resources into protected assets without losing ownership or control.

What's particularly valuable about this approach is that "if the applicant were to later need cash for any reason, the plots could be sold." There's often a robust secondary market for such assets, providing both protection and flexibility.

## Strategic Timing and Planning

### The 5-Year Look-Back Period

Medicaid imposes a 5-year "look-back" period for asset transfers. Any gifts or transfers for less than fair market value during this period can result in a penalty period of ineligibility. This makes advance planning crucial.

### Caution with Co-Ownership

Be careful when adding others to asset titles. According to Medicaid guidelines, if an applicant uses their money to purchase a vehicle with both their name and another person's name on the title, "the entire purchase price of the vehicle is considered a transfer" that may be penalized. Similar rules apply to other assets, so professional guidance is essential.

## Advanced Planning Techniques

### Irrevocable Medicaid Asset Protection Trusts

For those planning well in advance, irrevocable trusts can provide significant protection while allowing continued benefit from assets. When properly structured and funded outside the look-back period, these trusts can protect assets while potentially allowing the grantor to:

- Retain the right to live in the home

- Receive income from trust assets

- Maintain some indirect influence over trust assets

### Converting Countable Assets to Income

In some situations, converting countable assets into income streams through annuities or promissory notes may be appropriate. These must be carefully structured to comply with Medicaid rules.

## The Importance of Professional Guidance

Medicaid planning involves navigating complex and frequently changing regulations. What works for one family may not work for another, and strategies must be customized to your specific situation.

Improper planning can result in significant penalties, delayed eligibility, or unexpected tax consequences. Working with an experienced estate planning attorney who specializes in Medicaid planning is essential to developing a strategy that protects your assets while maintaining maximum control.

## Conclusion

With strategic planning, it's possible to protect significant assets while qualifying for Medicaid benefits. The key is understanding which assets are exempt, how to properly convert non-exempt assets, and the timing requirements involved.

Whether you're planning years in advance or facing an immediate need for long-term care, there are strategies available to help protect your legacy while securing the care you need. The sooner you begin planning, the more options you'll have available.

Remember: Medicaid planning isn't about gaming the system—it's about using legally available strategies to protect what you've worked a lifetime to build while ensuring you have access to necessary care.

www.LawFirmOfSamuel.com - (210) 394-1830