Medicaid Asset Planning

Medicaid asset planning is essential to ensure that your hard-earned wealth is not swallowed up by nursing home costs and that you can qualify for Medicaid without losing your assets.

Nursing home costs in Kentucky can go as high as nearly $300 a day, totaling over $100,000 a year. Such enormous amounts can swallow up life savings quickly.

By doing proper Medicaid Asset Planning with an expert Medicaid attorney, it is possible to qualify for Medicaid while still ensuring your family receives the benefit of your hard-earned legacy.

What is Medicaid Asset Planning?

Medicaid is designed to cover the nursing home costs of those individuals who do not have enough resources to pay for it themselves. On the face of it, this seems like a perfect system. In reality, those people who have worked hard their entire lives, accumulating wealth to bequeath to their loved ones and paying taxes to support the country’s infrastructure are the ones who will be penalized by having to pay for comfort in their final years, so that those who did not contribute as much can live their final years worry-free.

Medicaid Asset Planning is a vital action to ensure that you protect your wealth for your loved ones while still benefiting from Medicaid payments for nursing home costs. Medicaid Asset Planning often requires the establishment of a Medicaid Asset Protection Trust.

Under Medicaid laws, all assets are not created equal and some assets can be easily divested while others cannot.

What are Medicaid Asset Protection Trusts?

Federal law requires that Medicaid recovers what it paid for nursing home costs after the recipient’s death. It recovers that sum from the decedent’s estate.

Medicaid Asset Protection Trusts are a category of various types of trusts that can be established to protect your assets from Medicaid Estate Recovery. The type of trust you establish depends on the nature of your assets.

Once you (the grantor) hand your assets over to a trust to be managed by a trustee, those assets are no longer yours. You specify precisely how you want those assets managed by the trustee who is obligated by law to manage those assets entirely according to your instructions and always in your interests.

If your assets were placed in such a Medicaid Asset Protection Trust five years before you applied for Medicaid, then Medicaid cannot touch those assets, provided the trust was structured properly.

Many types of trusts can be used to protect your assets from Medicaid. For example, an income trust allows you and your spouse to receive a regular income until you die that is below the Medicaid disqualification thresholds , at which point the trust will be bequeathed to your heirs.

There are also trusts that allow you to transfer wealth to a disabled family member without any penalty from Medicaid.

A competent Medicaid attorney can best advise you on the type of trust you can use to best protect your assets.

What value of assets can you have when applying for Medicaid in Kentucky?

In Kentucky, a person may not have more than $2,000 in countable assets at the time of applying for Medicaid assistance.

The “community spouse”—the spouse who is not going into the nursing home—is allowed to have one-half of the couple’s joint countable assets, up to a maximum of $ 137,400.00 in the state of Kentucky, and a minimum of $27,840.00. This is called the “community spouse resource allowance” or CSRA. There is a small number of “noncountable” assets that do not count toward the values above.

These include:
·      One motor vehicle
·      Personal possessions (clothing, jewelry, etc.)
·      “Inaccessible” assets
·      Some life insurance
·      The applicant’s principal residence, provided certain factors are met
·      Prepaid funeral plans

The figures above are adjusted each year for inflation.

Requesting more than the maximum allowed CSRA requires a court hearing or court order.

The way it works is as follows: If a couple has joint assets of $150,000, then the assets will be reduced to $77,000—giving the community spouse $75,000 and the one applying for Medicaid a total of $2,000.

If the majority of assets and earnings are in the institutionalized spouse’s name, then the community spouse will be eligible for a “Monthly Maintenance Needs Allowance” (MMMNA) which is how much the spouse is allowed to receive monthly. This is calculated according to a complicated formula that your elder attorney would help you with.

What are “noncountable” assets?

There is a small number of “noncountable” assets that do not count toward the values above. These include:

  • Primary residence under certain circumstances (note that if equity is greater than $636,000.00, then applicant does not qualify for Medicaid)
  • Equity of $6,000.00 in income-producing, non-homestead real property, business or non-business, essential for self-support
  • One vehicle
  • Up to $4,500.00 combined equity of all other vehicles
  • Life insurance with no cash value
  • Life insurance with cash value if the total face value of all such policies is less than or equal to $1,500.00 & it is designated for burial funds
  • Irrevocable burial contracts
  • $1,500.00 designated for burial expenses (revocable burial contracts, burial savings accounts, or life insurance policies)
  • One burial plot per family member
  • Certain burial items
  • Life insurance irrevocably assigned or designated to funeral home and have a corresponding irrevocable funeral contract
  • Any amount in an (ST)ABLE account, any contributions to an ABLE account, and any distribution from an ABLE account for qualified disability expenses
  • An individual development account up to a total of $5,000.00, excluding interest accruing

A Medicaid Asset Protection attorney would guide you in determining which of your assets are countable and which are not.

Is Medicaid Estate Recovery avoidable in Kentucky?

In Kentucky, Medicaid is not allowed to recover costs from the deceased’s estate if there is a surviving spouse, a disabled child, a minor child, or total assets below $10,000. In Kentucky, the deceased’s family is also not personally liable for estate recovery costs.

Kentucky also has a “hardship waiver” which can sometimes be used to prevent estate recovery, such as if a child has no other residence than the one previously used by the deceased, provided certain conditions are met.

Quick facts about Medicaid in Kentucky

Medicaid eligibility requirements 1) In a nursing home

2) Must require skilled or intermediate nursing care

3) Specific financial requirements as delineated above

Must the community spouse (the non-institutionalized spouse) pay a portion of their income to the nursing home? No.


What should be done if the applicant’s income is too high to qualify for Medicaid? Usually, put the income into a specific type of trust called a Miller Trust. These trusts are also called Income Cap Trusts, Irrevocable Income Trusts, Qualifying Income Trusts, and various other names.


The establishment of such a trust is a detailed topic and should only be established under the guidance of an experienced Medicaid attorney.

How much of the assets can a community spouse keep? Half of the joint assets up to a maximum amount of $130,380 . This figure is adjusted annually to account for inflation.


Which are the estate recovery exemptions? Some of the exemptions for estate recovery in Kentucky include:

-If there is a surviving spouse, disabled child, minor child, or assets under $10,000, then there is no estate recovery

-Liquid assets and executor’s fees can usually be deducted

-Joint tenancy homes with the recipient’s adult child are subject to certain exemptions

-Life annuities on the community spouse

-IRAs. It is vital that a beneficiary be named in the IRA.

Can gifting be used to reduce assets to qualify for Medicaid? There is a penalty period imposed depending on the amount gifted, and the average monthly cost of being in a nursing home in that state. In Kentucky, this currently equates to roughly 510 days for a gift of $100,000. So, if a person gifted their children $100,000 they would need to wait this amount of days before applying for Medicaid.
What if a Kentucky resident receives more monthly income than Medicaid allows? Kentucky is an “income cap” state. That means that income over the maximum allowed income—$2,177.50/month in 2021—will disqualify the applicant from receiving Medicaid benefits. In states where the income is not capped, applicants are allowed to spend their excess income on nursing home costs. This is not allowed in Kentucky.

At Dixie Law Group, we have often seen how families suddenly need to put a parent or grandparent into a nursing home without the necessary Medicaid Asset Protection planning in place.

These are difficult situations to navigate, but the good news is that they are not always hopeless. Depending on the person’s situation, it is sometimes possible to protect some or all of the person’s assets through Dixie Law Group’s specialized Medicaid Crisis Planning service.

If you are in this situation, please give us a call as soon as possible to assist you in protecting your or your loved one’s assets from Medicaid.

Seek advice from a competent Medicaid attorney in Kentucky to protect your assets

The intricacies involved in qualifying for Medicaid while still protecting your assets are convoluted and complicated. It is virtually impossible to do so successfully in Kentucky without the assistance of an experienced elder law attorney.

At Dixie Law Group, we have helped many individuals and families with their estate planning and Medicaid asset protection needs. We have also helped many people who had no Medicaid asset protection in place with our Medicaid Crisis Planning service.

Give us a no-obligation call to learn more about how we mig help you with your Medicaid Asset Planning needs.

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You can contact our lawyers in Louisville at 502-806-8711 or contact us online. Initial consultations are always free.


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