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Medicaid planning can be a complex affair

Many elderly people in New Jersey may someday find that they need to enter a nursing home. While admitting you can no longer live independently can be a blow to one's ego, if you can't take care of your daily needs, it may be necessary to seek help.

That being said, nursing home care can be very expensive. Most people do not have the means to pay for a nursing home out of pocket. They must seek other sources of financing. One source of financing that may be available to some is Medicaid benefits.

However, Medicaid benefits are only available to seniors with few assets who have a low income. This means that some seniors will have to engage in a financial strategy known as a Medicaid "spend down." Through a Medicaid spend down, a person's income will ultimately be made low enough that they will qualify for benefits. However, successfully completing a Medicaid spend down can be complicated.

One option that may help is creating an irrevocable trust. One's assets can be placed in the trust. Once that is done, the person does not own those assets any longer -- the trust does. The person can still use the trust assets in certain ways, but they have given up control of them. This can help a person become eligible for Medicaid. However, it should be done well in advance of actually needing Medicaid, as there is a five-year look back period.

When it comes to planning a Medicaid spend down, it may help to seek legal advice. Medicaid rules are complex. Without the help of an attorney, a person may find they are spending down more than what they actually need to obtain Medicaid benefits. Moreover, if a spend down is done incorrectly, a person may actually owe the nursing home money. Other rules, such as filial responsibility laws, could make it so that a child is on the hook for their parent's nursing home bills.

As this shows, while a Medicaid spend down may be useful, it can be difficult to execute properly. However, with the right help, an appropriate Medicaid planning strategy can be put into place that may allow a person to pay for nursing home care with Medicaid benefits, if all requirements are met.

Source: U.S. News & World Report, "Some Do's and Don'ts of a Medicaid Spend Down," Geoff Williams, April 14, 2015

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