Traditional wisdom says a person has to spend down almost all assets before qualifying for Medicaid, but that is not necessarily true, according to two Louisiana financial advisors.

Techniques exist to qualify for Medicaid, which pays for long-term care, without losing all of the family’s accumulated wealth. Ken Fletcher, president of Fletcher Financial Group in Monroe, La., a full-service wealth management firm, and Jordan Smith, an advisor at Fletcher, have developed strategies to help clients facing long-term care decisions.

As an example, Smith said the firm recently had two clients, a husband and wife, who were facing a family crisis. The wife had to go into a long-term care facility. In Louisiana, Medicaid allows a spouse of someone in a nursing home to have $120,900 in assets, plus a house and a car and a pre-paid burial plan worth up to $10,000, and the institutionalized spouse can still quality for Medicaid to pay the cost of the long-term care.

The husband, in this case, had approximately $250,000. A law that many do not know exists allows the spouse remaining at home to have unlimited income. So under Smith’s advice, the husband bought a Medicaid compliant annuity using assets above the asset limit of $120,900 and began receiving a monthly income from it.

“In this way, we took more than half of his savings and turned it into an income stream for the husband and his wife can still receive Medicaid,” Smith says.

There are also ways to use Medicaid compliant annuities to pay for long-term care costs for a single individual so that some money remains at the end for heirs. The alternative is to spend down all assets until the institutionalized person qualifies for Medicaid, Smith said.

The examples sited are relatively straightforward ones, but few are that simple. Long-term care cases involving Medicaid are often complicated and require a good deal of handholding for the client, Fletcher said.

Fletcher Financial has seen an increasing number of people come to the firm with Medicaid problems, Fletcher said.

“Part of the problem for advisors, and the attorneys they work with, is they may not even realize there are solutions available to help the clients,” Smith said. Further complicating the situation is the fact that Medicaid, though a federal program, is administered by the states, so the requirements for spending down assets and rules for qualification can vary from state to state.

In all states, Medicaid looks back five years to see what assets have been given away and assesses a penalty for any assets disposed of during that five-year period before Medicaid is applied for. Medicaid will not pay for long-term care for a number of months. The number of months is determined by the amount of assets disposed of during that 5-year period.

First « 1 2 » Next