All the assets, including the income of a person applying for Medicaid, are under consideration during the Long-Term Care Medicaid financial qualification process (a/k/a “Frosty”). Assets are classified initially as either protected or countable. Protected assets are NOT subject to the spend-down requirement. Countable assets ARE subject to the spend-down requirement. So, focus on keeping Frosty cool to protect assets from feeling Medicaid’s heat!
Certain assets are classified as protected, depending on the nature of the application itself. If a person is applying for in-home services, then their home is treated as a protected asset. If the applicant is married, then their spouse’s (a/k/a “community spouse”) 401K/IRA and income are treated as protected assets.
There are permitted strategies to reclassify assets from countable to protected. For example, a married applicant’s 401K/IRA is a countable asset. It becomes a protected asset by using it to purchase a Medicaid-compliant annuity which in turn pays income to the community spouse.
The applicant can protect countable assets by setting up certain types of Trusts to own and control the assets. There are three sanctioned Trusts:
2. a Pooled Trust,
3. and an income-only Irrevocable Trust (Miller Trust).
The assets in the name of the Trust are protected and are available to the applicant. The primary reason Medicaid allows these specific Trust arrangements is that Medicaid is the named beneficiary of the Trust when the applicant dies.
