For best results, start Medicaid planning as early as possible

Five year look-back rule means scrutiny of any recent gifts

Asset protection is the simple concept of looking forward to Medicaid eligibility, but the execution can be very complex. At the most basic level, the idea of simply giving away assets until a senior is at a level of wealth that qualifies him or her for Medicaid is a somewhat accurate description of certain asset protection strategies. However, this simplified formulation of asset protection misleads many into thinking they can plan for Medicaid eligibility successfully without the help of an attorney, which is usually not the case.

When someone applies for Medicaid, there is an important rule that comes into play. Known as the “five year look-back rule,” it allows Medicaid officials to look back five years into an applicant’s financial history. If the applicant has given away any assets, with a few limited exceptions, the Medicaid application may be denied.

Yet, despite the five year look-back rule, potential Medicaid applicants, even those currently in need of care, may be able to take advantage of certain financial and legal tools to protect their assets. Trusts, including irrevocable trusts, pooled asset trusts and charitable remainder trusts may be employed to help safeguard assets. Certain annuities may be used to convert assets into an income stream that is not reachable by Medicaid or nursing home billing departments. And, nonexempt assets may be reallocated to become assets that are exempt from consideration in determining Medicaid eligibility.

Learn more about protecting assets from Medicaid by contacting an estate planning attorney

The tools outlined above, along with other asset protection devices, can help get assets where their owner wants them. While it is possible to protect assets to a certain extent at any point, it is important to remember that when an estate plan is put in place earlier, more and better options will be available.

If you want to preserve your assets, or if you are concerned about the assisted living costs that a family member may incur, get in touch with an estate planning attorney experienced in asset protection.