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Medicaid Asset Protection: Countable Assets in Satisfaction of the Mandatory Spend-Down

What are the Countable Assets & Non-Countable Assets in Medicaid Spend-Down?

I’m certain, that if you are over the age of 65, you have participated in a few seminars, talked to a few people, professionals and otherwise, and informed yourself of the new confiscatory rules of Medicaid, the 60 month look-back, and have become wide awake to the fact that if you don’t spend the time now, to sharpen your axe, you will become the primary payer of your nursing-home costs, right down to your last $2,000.
The government provides very little information and does NOT promote website knowledge to help you make smart decisions. I know this because, we bought the telephone number 1-877-21-MEDICAID (1-877-216-3342) and we were absolutely overwhelmed with phone calls. In fact, up until a couple of years ago, it was illegal for any advisor to offer fee-based information about how to plan for Medicaid.

Laws Surrounding Transferring Assets for Purposes of Obtaining Medicaid

As part of a 1996 Kennedy-Kassebaum health care bill, Congress made it a crime to transfer assets for purposes of achieving Medicaid eligibility.

Congress repealed the law as part of the 1997 Balanced Budget bill, but replaced it with a statute that made it a crime to advise or counsel someone for a fee regarding transferring assets for purposes of obtaining Medicaid.

This meant that although transferring assets was again legal, explaining the law to clients could have been a criminal act.

In 1998 then Attorney General Janet Reno determined that the law was unconstitutional because it violated the First Amendment protection of free speech, and she told Congress that the Justice Department would not enforce the law. Around the same time, a U.S. District Court judge in New York said that the law could not be enforced for the same reason.

Accordingly, the law remains on the books, but it will not be enforced.

I don't make jokes. I just watch the government and report the facts.
- Will Rogers (1879 - 1935), quoted in Saturday Review, Aug. 25, 1962

Countable Resources to Pay for Your Own Medicaid:

The short definition: everything “you own” or “you own jointly with your spouse” that you can spend or convert to cash, is “countable” towards your responsibility to pay for your nursing home care, till you die, then the state enabling acts will collect, what’s left.
Cash, checking, savings, CDs, government bonds, mutual funds, retirement accounts, IRAs, 401Ks, 403b, TIAA-CREF and other retirement accounts, cash value life insurance, annuities, tax deferred annuities, any car beyond the 1st car, trucks, boats, farm livestock, equipment, and machinery, land, commercial real estate, “everything.”

What are “Not Countable” Assets in Medicaid Rules:

Your personal possessions, such a clothing, furniture, jewelry, one motor vehicle without regard to value, second auto – to the extent its medically required for transportation of the Medicaid participant or family member providing for such purpose (each state may have different rules), prepaid funeral plans, small amounts of life insurance, assets that are not easily accessible such as a lawsuit in progress or other property that cannot be liquidated. For married spouses, the residence is protected up to $500,000 of equity (some states $750,000), if you are single the residence is up for grabs with some exceptions such as the Medicaid patient/resident can prove that there’s a reasonable likelihood of being able to return to the home, and other similar nuances i.e. disable child living in the home, or another relative living in the home. It gets even more complicated, but the purpose of this dissertation is not for you to become the expert in Medicaid exclusions. The purpose is to “open your eyes” to what your elected officials are doing to suppress your life-time’s work.

It has been observed that a pure democracy if it were practicable would be the most perfect government. Experience has proved that no position is more false than this. The ancient democracies in which the people themselves deliberated never possessed one good feature of government. Their very character was tyranny; their figure deformity. Alexander Hamilton (1755 - 1804), Speech on 21 June 1788 urging ratification of the Constitution in New York.

How to “Plan Out” of These Restrictive Quagmire of Medicaid Laws

...I don't like to think of laws as rules you have to follow, but more as suggestions.
-George Carlin (1937 - 2008)
Previously stated, it’s illegal to advise around Medicaid laws; it’s on the books, just not enforced.
The best way and the only significant effort that pays big dividends is NOT TO FALL IN THIS TRAP. If you own nothing, then you don’t fall in this trap. This quicksand of perplexing laws is designed to confiscate. If you own nothing, then government gives you more than you deserve. Or you deserve to own nothing and therefore should be at the mercy of government. Government rewards risky behavior. If you saved nothing, spent everything, and in fact you owe more money than you could possibly earn, you shall be rewarded with every possible government give-away, and bankruptcy.

How to Legally Own Nothing with Regards to the Medicaid Spend-Down

Assets owned by a “THIRD PARTY FIDUCIARY” are not available for the satisfaction of YOUR LIABILITY, no matter who’s the creditor - including any government or quasi-government agency, state or federal. Assets owned by someone not related to you by blood or marriage, are not owned by you - period.
The “someone” can be a legal entity established under law. An IRREVOCABLE TRUST with an INDEPENDENT TRUSTEE, not related to you by blood or marriage is a third party fiduciary.
Assets owned by a THIRD PARTY belong to the THIRD PARTY and are not available to “your creditor” in satisfaction of debts created by you.

The Trustee as Independent Person (i.e. Third-Party Fiduciary)

The TRUSTEE must be an INDEPENDENT PERSON, not related to you by blood or marriage. There must a true and perceptive legal independence between you and the legal fiduciary obligation created by the Trust agreement. You must be willing to “divorce” yourself from your money.

Avoiding Fraudulent Conveyance of Medicaid Asset Protection

Assets transferred to your Irrevocable (Third Party) Trust must be in EXCHANGE of equal value in order to avoid FRAUDULENT CONVEYANCE claims by past, present, or future not-yet-born creditors. You would not give your assets to a third party without adequate and full consideration; that would be fraudulent. In other words, fraudulent conveyance is avoided when you give me $100,000 and in exchange, I give you $100,000 of goods or services. If I gave you less, then it would be fraudulent to the extent you received less than equal consideration.
If I only had an hour to chop down a tree, I would spend the first 45 minutes sharpening my axe...
- Abraham Lincoln (1809 - 1865)



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