Texas and other states impose federal rules and regulations for qualifying for Medicaid assistance by elderly applicants. Because Medicaid is a primary source of funding for nursing homes and similar institutions, long-term care planning may include planning for this federal program. For those who cannot afford insurance to cover nursing home or other long-term care, Medicaid may be the main available remedy.
Sometimes, where there is close family planning, the elderly patriarch or matriarch may be able to stay at home and obtain the necessary care from a host of family and friends, along with supplemental private nursing when necessary. This type of alternative may or may not turn out to be feasible. Thus, Medicaid planning may be an important back-up strategy, even if it turns out that it is not needed.
To be eligible for Medicaid, a person’s net worth must be less than $2,000. This is often attainable with proper planning. Fortunately, cut rate yard sale values are acceptable. A second major requirement is that one must not have given away anything of substantial value in the five years prior to applying for benefits.
There are some common techniques that are used. One is to simply give away assets to family members, but it must be done over five years from the time of the application for Medicaid benefits. This option may straddle the recipient with a high capital gains tax when they want to sell the property. Regarding real estate, the planning process may use a life estate in the titling of real estate ownership.
The owner transfers title to a third person, presumably a family member or intended heir. The owner, however, retains a life estate with merges to create full-fee simple ownership in the grantee upon the owner’s death. In Texas and other states, this is a complex operation for long-term care planning purposes, not to be tried without professional assistance. A third major technique is to set up what is generally called a “Medicaid Trust.” This is also a complex document, requiring an experienced attorney who is knowledgeable in creating such trust instruments.
Source: limaohio.com, “Legal-Ease: Asset protection from nursing home expenses“, Lee R. Shroeder, May 27, 2017