Protecting Your Money From Medicaid

The elderly may find themselves facing financial ruin in their later years. Fortunately, there’s Medicaid, but in most cases, they have to spend down almost all their savings — money they may have spent their entire working lives amassing. Fortunately, if you are careful and work far in advance, there are ways to legally protect your savings from Medicaid (also referred to as Title 19).

The key number to remember is 60 months. You need to set aside money 5 years before you need Medicaid or you are out of luck, possibly facing penalties and program disqualification. With that caveat in mind, which legal and financial strategies can help?

Asset-protection trusts. These trusts are designed to provide asset protection, so the assets no longer belong to you and are beyond the reach of Medicaid. You can transfer your home into a trust and still live in the home. You can also add income-producing assets and still receive the income but not the principal.  The trust ESM will prepare for you is called an Irrevocable Income Only Trust (IIOT).

Qualified income trusts. QITs are irrevocable trusts designed to hold an applicant’s excess income. Some states allow the spend down to meet Medicaid limits, but others don’t, so QITs come in handy. A trustee is appointed to manage the disbursement of funds for allowable expenses.

Pooled income trusts. These also are irrevocable accounts used to hold excess income, but they are for disabled individuals. The surplus income is pooled together and managed by a nonprofit that acts as a trustee and disburses the funds. Unused funds remain with the trust for charitable purposes.

Spousal transfers. Transfers between spouses are permitted and, unlike many other strategies, are not subject to the look-back period. One basic Medicaid-planning strategy is to transfer assets to the well spouse who still lives in their home, referred to as the community spouse.

This is just an introduction to a very complex topic, and rules can vary from one state to another. You need specialized professionals who are familiar with your state’s Medicaid programs and who can work within the laws to produce as favorable an outcome as possible for you. Legally sheltering certain assets and using them to avoid paying the high cost of a nursing home stay will benefit you and your children, but you need to start now and not wait until the situation becomes critical.

Do you have questions?

Count on our experienced team at Ericson, Scalise & Mangan, PC to provide you with sound guidance for your Estate Planning, Elder Law, Real Estate, Probate, Trust & Estate Administration, and other legal needs. For assistance, contact us today at (860) 229-0369, or email us at

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