43 msfocusmagazine.org Medicaid Planning Examples Conside theses hypothetical examples to help you understand the variety of strategies involved in Medicaid planning: Betty Vital Stats: Divorced, one daughter, using a nursing home Bettyissingleandhas$ 100,000inhername when she needs to qualify for Medicaid’s nursinghomeassistance.BettyhasaMedicaid- compliantCareAdvocacyAgreementbetween her and her daughter, Sue, prepared by an elder care attorney. Under the agreement, Betty hires Sue, who lives out of state, to be a care supervisor. Betty transfers her $ 100,000 toanaccountinSue’snameoraCareTrustthat Sue operates. Betty is approved for Medicaid immediately. No five-year look-back rule or penalty is triggered. Betty did not gift Sue the money, but hired her daughter for fair market value. She pays her $ 1,000-a-month social security check to the nursing home. Don VitalStats:Widowed, needs at-home aides Don needs at-home aides to age in place. He owns a home and has $ 100,000 in an IRA. Don’s estate planner helps him ensure his annual required minimum distributions are set to a monthlyMedicaid- and tax-compliant pay-out schedule. The IRA no longer counts as an asset, throwing Don overthe $ 2,000 cap. The IRAis only treated as an income stream. Don appears ‘pooron paper’ in assets and has only two income streams: a Social Security check, and an IRAcheck. Don is immediately approved for Medicaid. Mike and Sally Vital Stats: Married, two adult children, Sally needs care Mike and Sally have been married for 50 years. They own a home, car, and $ 300,000 in savings and investments. Bettyneeds care. The home and car are exempt assets, but cash assets are not. However, transfers between spouses are exempt and penalty- free without limit. All these assets can be transferred to healthyhusband Mike penalty- free under Medicaid rules. The five-year look-back rule does not apply. Sally now has $ 2,000 or less. Mike has $ 300,000. Mike loans $ 225,000 to their kids at the time a Medicaid application for Sally is filed. Mike did not gift any funds, but merely lentthem.Thekidsreceivedthefundsincome- tax-free, and used the borrowed money to repay the loan. The loan only counted as a monthly income stream for Mike. Medicaid treats Mike as having only $ 75,000 in assets in his name alone and two income streams: his social securityand loan repayment check. The day after Sally’s Medicaid application is approved, the kids can repay the loan in full. Mike is allowed to go over his asset cap at that point. Claire and David Vital Stats: Mother and adult son, David needs care David is on Medicaid,with no assets in his name, and his mother Claire dies. If Claire’s will leaves everything outright to David, it will cause David to exceed the $2,000 asset cap for Medicaid. The lawyer who prepares Claire’swill can add language to specifythat if David is on Medicaid at the time Claire dies, all Claire’s assets are to be held in a special needs trust for the benefit of David, as the surviving heir, so he can keep his Medicaid. The special needs trust can be used to up- grade David’s care while on Medicaid.