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General Guidelines for Medicaid Planning and "Medicaid Impoverishment" 

The amount of income a Medicaid applicant may collect and still qualify for Medicaid to pay nursing-home bills varies from state to state and changes periodically. In most states, if one spends all their income on nursing-home costs - minus a small personal-needs allowance, typically less than $100 a month - Medicaid will cover the balance of the nursing home's charges.

The amount of assets an applicant may keep is set by each state. In general, Medicaid considers all assets owned by either spouse, then allows the spouse still living at home to keep half of the couple's assets up to state-by-state limits. The family home is usually exempt from this calculation if the applicant is expected to return to it after leaving the nursing home or if a spouse is living in the home.

There are different strategies for giving away assets to qualify for Medicaid coverage. The applicant should obtain advice from an attorney who specializes in Medicaid Eligibility and/or Elder Law.

1. Transferring assets to an irrevocable trust. Trusts established to qualify a person for Medicaid involve waiting periods. Though some exceptions apply to individuals defined as disabled under the Social Security laws, most people who dispose of their assets by putting them in a trust must work within tight constraints. For an irrevocable trust to be effective, the applicant should not have the option of tapping its principal.

When applying for Medicaid, the applicant must disclose whether he or his spouse ever created a trust or whether either of them is the beneficiary of a trust. They must produce a copy of the trust document, plus records of all trust transactions and distributions that have occurred within 60 months of the Medicaid application date. Transfers and distributions of assets can create a waiting period which varies by the amount of assets involved and the average monthly fees for nursing-home care.

Continue to the next article
('Immediate Income Annuities in Medicaid Planning')