Crisis Medicaid Planning – Reverse Half A Loaf


Are you or a loved one entering a nursing home  and shocked by the monthly cost for the upcoming care?  Have you been told that it is too late to protect the family home and financial assets?  Are you afraid all of the family wealth will be lost?  Even if you and your family have done no proactive estate and asset protection planning, it is not too late to enter into what we refer to “Crisis Medicaid Planning.”  Despite the immediate need for long term nursing care and the related expenses, you can still protect 40%-60% of the family assets with prompt action and prudent planning.


The sooner you act, the more you can save through the use of gifting, establishing a Medicaid Compliant Annuity or promissory note and Medicaid qualification.  This is a very technical issue and planners must adhere to all of the requirements of the Deficit Reduction Act of 2005.

This planning is used almost exclusively in an emergency situation where the person entering a nursing home has done no pre-planning.  We still advocate that our clients employ asset protection planning well in advance of needing long term care so that we might protect 75% to 100% of their assets.  However, we understand that not everyone knows they can do advance planning and they might get caught unaware or the need for long term care might come unexpectedly.  So, if your family is caught in one of these situations, you can still protect a large portion of the family wealth.

As they say on TV, DO NOT TRY THIS AT HOME!  You really do need technical advice and guidance.  A Medicaid Compliant Annuity must be purchased with approximately approximately 1/2 of the assets of the person entering the nursing home.  The exact value of the annuity will depend on several factors and will be determined by using an applicable formula.  The Medicaid Compliant Annuity turns assets into an income stream paid to the person entering the nursing home for a period of months necessary to get the person through the ineligibility period referenced below.  The annuity IS NOT a gift.  Approximately one-half of the person’s assets is gifted to a Medicaid Asset Protection Trust benefiting children or other beneficiaries.

After the family member enters the care facility, the Annuity is purchased and Gift is made, a Medicaid application is submitted which will be summarily rejected because of the amount gifted as referenced above.  The application for Medicaid and rejection thereof is necessary and intended so that a Medicaid ineligibility period can result.  The ineligibility period is roughly equal to the amount of time the gifted assets would have paid for the person’s care had they retained the money.  There is a state by state average care cost that will be used in determining this ineligibility period.


NOTE:  The numbers below are not from an actual case.  They are just intended to help provide you with a better understanding.

Total Assets:                          $170,000

Amount gifted:                        $90,000 placed into a Medicaid Asset Protection Trust for benefit of children/beneficiaries
Average cost of care in PA:      $  9,000/M.
Ineligibility Period:                    $90,000/$9,000 = 10 months.

Amount Placed Into Annuity:      $80,000  The Medicaid Compliant Annuity income stream plus the nursing home resident’s own income should come out to just under the monthly cost of the nursing home for the 10        months of ineligibility.
Annuity monthly payment:          $7,990/M for 10 Months.
Social Security:                                  $1000/m
Income Total:                                     $8,990/m.

As a result of this planning, the family gets to keep the gifted amount = to roughly 1/2 of the person’s assets.  ie. $90,000.  Yes, they have to spend $80,000 on nursing home care, but that is a heck of a lot better than spending $170,000!

As discussed above, this article is a simplification of the process intended to provide a straight forward example.  Please seek legal advice to carry this planning out.

For more information on this planning option and many others, please click here and register to receive regular Elder Law Newsletters from Unruh, Turner, Burke & Frees, P.C.  They are great and will keep you up to date and provide great information and ideas.

For assistance dealing with developing a comprehensive nursing home asset protection plan in Pennsylvania, please contact Douglas L. Kaune, esquire at 610 933 8069 or email him at Doug’s entire practice is focused on elder law, Medicaid Application, estate planning, trust planning, estate administration and protection of clients’ assets from nursing home spending and estate and inheritance taxation. Unruh, Turner, Burke & Frees, P.C. is a full service law firm which has three convenient office locations in Phoenixville, West Chester and Paoli, Pennsylvania. The firm primarily services clients in Chester, Montgomery, Delaware, Philadelphia, Bucks and Berks Counties, but can represent clients throughout Pennsylvania.