Medicaid Crisis Planning Case Study: Protecting Assets When Nursing Home Care is Needed NOW

Scenario: John, 78, suffered a stroke and needs nursing home care immediately. His wife, Mary, 75, is healthy and lives at home. They have:

  • $150,000 in savings

  • A home worth $400,000 (paid off)

  • John’s Social Security: $2,200/month, Mary’s Social Security: $1,800/month

  • No long-term care insurance

Problem:

Medicaid’s asset limit is $2,000 for John (in their state)

  • They didn’t plan ahead, so the 5-year look-back rule applies.

  • Nursing home costs $8,000/month—they can’t afford this long-term.

Crisis Plan: Step-by-Step Strategy

  • Since Mary still lives there, the home is automatically protected (Medicaid won’t count it).

  • If John passes first, Mary keeps the house. Later, a Lady Bird Deed (if available in their state) can avoid probate and Medicaid recovery.

Allowed Medicaid spend-downs:

  • Prepay funeral expenses ($15,000 for John & Mary, irrevocable).
  • Home repairs ($20,000 for a new roof, wheelchair ramp).
  • Pay off debts ($10,000 car loan, credit cards).
  • Buy a Medicaid-compliant annuity (see next step).

Purchase a Medicaid-Compliant Annuity (MCA):

  • Cost: $100,000 (from savings) → turns into a fixed monthly income for Mary.
  • Rules: Must be irrevocable, immediate payout, and name the state as beneficiary (if Mary dies).
  • Result: $100,000 is no longer a countable asset.

* Community Spouse Resource Allowance (CSRA): Mary keeps $154,140 (2024 limit).

  • Since they only have $150,000 in savings, she can retain all of it after spend-downs.

* Minimum Monthly Maintenance Needs Allowance (MMMNA):

  • Mary’s income is 1,800/month∗∗,butthestateallows∗∗1,800/month∗∗,butthestateallows∗∗2,465/month (2024 min.).
  • Solution: John can divert $665/month of his income to Mary (via a court order if needed).

If they recently gifted money (e.g., $20,000 to a child), Medicaid imposes a penalty period.

  • Example: Their state penalizes $10,000/month, so 2 months of ineligibility.
  • Solution: Privately pay for 2 months ($16,000), then apply.

Estate Recovery Risk: If John dies, Medicaid may try to recover costs from his estate.

  • Solution: Mary should consider an irrevocable trust for remaining assets (if she doesn’t need Medicaid soon).

Final Outcome:

✅ John qualifies for Medicaid in 60-90 days (vs. waiting 5 years). ✅ Mary keeps the house, $150,000 savings, and enough income. ✅ No forced home sale or total asset depletion.

Key Lessons:

  1. Crisis planning works but requires fast, strategic action.

  2. Spend-downs must follow Medicaid rules (no outright gifts!).

  3. An elder law attorney is crucial (especially for annuities, spousal refusal, or complex cases)…

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