Asset Protection Protect Inheritance From Medicaid
Make Sure Your Assets Are Protected For Future Generations
July 8, 2004
By Monish Datta
Medicaid, is the government health insurance
program for low-income people. Medicaid rules vary
from state to state but coverage includes nursing
home care, doctor services, lab tests, x-rays, and
hospital services.
Generally speaking, in order to qualify
a single person is permitted to own no more than a
home, personal belongings, a car, a small amount of
savings, and can have only a small income of around
a few hundred dollars per month. Read on to learn
about Asset protection, protecting inheritance from
Medicaid.
Individuals have long used a variety of planning techniques to
accelerate their Medicaid eligibility. Structuring one's finances
to allow qualification for Medicaid has traditionally involved some
form of gifting. Current Medicaid regulations will disqualify an
applicant who makes a gift in the 36 months (60 months if the gift
is made to a trust) immediately before applying for benefits. Gifts
of less than $200,000 ($335,000 if to a trust) may result in a shorter
period of ineligibility.
The practice of becoming eligible for Medicaid by giving away one's
assets has always raised moral questions. The traditional issue
has been whether Medicaid benefits should be available to someone
who has transferred significant assets to loved ones. The more common
debate exists when the purpose of the gift is to preserve an inheritance
for heirs.
Where a conflict exists between the needs of the parents and the
goal of maximizing an inheritance, the children must limit their
role in the planning process. Nothing should be allowed to detract
from the attorney's ability to serve the parents' goals and objectives.
Various techniques of protecting assets are:
Consider establishing your business as a corporation or limited
partnership rather than as a proprietorship or partnership. A corporation's
obligations are limited to its assets so this structure can provide
protection for your personal assets.
Hold assets such as real estate and equipment in a leasing company
that is a sister or parent company of the operating entity.
An Asset Protection Trust can be a flexible tool for isolating
non-business assets from such risks. Assets transferred to an Asset
Protection Trust do not form part of the transferor's bankruptcy
estate and are not subject to claims of creditors. Such trusts are
generally irrevocable for a period of time, such as ten years.
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