Reed: Can these assets be saved?

Sandra Reed

Guest columnist

Life Care Planning

Betty, an 81-year-old widow, owns multiple properties worth $1 million, liquid assets, including stocks, bonds and cash worth $2 million, a a long-term care insurance policy for four years of care up to $126,000 per year.

Her monthly income from social security and distributions from her IRA is $4,600. She recently had a stroke and daughter, Monica, wants to apply for Medicaid for her mother to protect her inheritance. Are there any planning strategies that could make this possible?

Can planning strategies allow Betty to qualify for Medicaid?

The simple answer to this question is "No," according to some elder law lawyers responding to a posed similar scenario.

Betty could meet the income requirement even though her income is above the monthly allowable amount of $2.982 for a single person by establishment of a Qualified Income Trust, often called a Miller Trust. The applicant's income is deposited into an account from which the nursing home is paid with the applicant allowed to retain $75 a month for incidentals.

However, Betty's assets far exceed the countable assets limit allowed for a single person.

Can persons with more than $2,000 in assets qualify for Medicaid?

Persons with more than $2,000 countable assets can qualify for Medicaid. The operative word here is "countable" as only countable resources are subject to the limitation.

Noncountable assets include a homestead worth up to $752,000 in 2026. The value of other properties are countable. Betty has multiple properties, so even if her homestead was exempt, these disqualify her.

An IRA of any amount in payout status (meaning Required Minimum Distributions are being made) is a noncountable assets in Texas. Since Betty is taking RMDs, her IRA isn't a countable asset. Betty's problem is that her $2 million non-IRA assets are countable.

Planning strategies available to reduce assets for Medicaid qualification

Strategies for persons to preserve otherwise countable assets exist. One strategy is gifting, either outright or through an irrevocable trust. The trick is that Medicaid looks back five years prior to an application and counts any gifts made during the period are countable subject to a formula that delays qualification.

With large gifts, the delay becomes so long it essentially equals disqualification. Thus, strategic gifting works when individuals are healthy enough not to need long-term care for at least five years after the gifts are made. In Betty's case, she has had a stroke and needs care now.

Betty can rely on her insurance four years of care up to its limits, private paying for any overage. Following that, she must use her own assets to pay for all her care.

Sandra W. Reed practices Elder Law in Somervell County, which includes probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid Planning. She lives on beautiful Chalk Mountain and can be reached at 817.946.2809 or at [email protected].