When an individual believes it is time for nursing home care (or if they are in a nursing home already), that individual will typically begin a “spend down” process. When we say “spend down”, we referrer to the process through which an applicant will spend or otherwise use available resources and assets until they qualify for Medicaid.

Because Medicaid is means tested, an applicant cannot have above a certain amount of countable assets. Countable assets may be liquid assets, such as cash, real estate, or automobiles. Here are some Do’s and Don’ts for Medicaid applicants during a spend down:

DO- Purchase Non-Countable/Exempt Assets. When spending down assets to qualify for Medicaid, the applicant is not free to spend their money any way they wish. While it might seem unfair, Medicaid will assess penalties, not only for giving assets away, but for spending money in a way which will be seen as trying to qualify for Medicaid faster.

However, there are certain purchases which are permissible, and can really help accelerate the spend down process. An applicant is allowed to own one home and one automobile, so if the applicant has enough cash available, either one of these purchases are permissible.

DO- Pay off existing debts. Similar to purchasing Non-Countable or Exempt assets, an applicant may make payments towards existing debts. For example, the applicant may pay off a car note, or make payments toward a mortgage which exists on the primary residence. Also, any medical bills which the applicant has incurred may be paid off or paid down during the spend down period.

DO- Explore the option of turning cash into an income stream. Medicaid views an applicant’s income and cash assets very differently. There are methods of taking cash and turning it into income for the applicant, rendering them eligible for Medicaid much faster than a traditional spend down of that cash. This is an area where a seasoned Medicaid attorney can maximize the applicant’s ability to qualify for Medicaid.

DON’T- Give assets away. The cardinal sin, if you will, when trying to qualify for Medicaid, is giving your assets away. This issue is frequently complicated by the fact that most people are not aware of the 5-year lookback period for Medicaid. When an individual applies for Medicaid, the county agency will demand 5 years’ worth of financial records for the applicant; the agency will then conduct a thorough review of those records to discern whether or not the applicant gave any assets away.

“Gifting”, according to the Medicaid rules, includes traditionally understood gifting away of money/assets, transfers for little-to-no consideration (like changing the deed of the house to the children), or selling an asset for less than fair market value (i.e. selling your house for half of what it is worth). Each gift will be examined by Medicaid, and based on the value of the gift/transfer, they will assess a period of ineligibility that can be catastrophic.

DON’T- Wait till the last minute to plan. Too often, we have clients reach out to our office to explain that a parent or a spouse has entered a nursing home, and that they failed to do any kind of planning prior to the nursing home stay. Now, sometimes this cannot be helped. An individual may go from perfectly healthy to needing a nursing home in a very short period of time. If there is a sense within a household that someone may be failing in health, or that skilled nursing care may be need in the future, it is always a good idea to address this sooner than later. Simply put, the more time you give your attorney to help plan, the more assets they can protect for you and your family.