Our Texarkana Medicaid Planning Lawyers Explain Ways to Protect Your Savings Before Applying for Medicaid

Since Medicaid eligibility often comes down to little more than income, senior citizens are often in a precarious position: having too many assets to qualify for financial assistance, but too few to pay for necessary care out-of-pocket. 

You don’t have to leave your health—or your wealth—to chance. Ross & Shoalmire, Elder Law Attorneys, have decades of expertise in helping Texas and Arkansas families plan for long-term care. Read more to find out how giving gifts could impact your eligibility for Medicaid, and how our team could ensure that your savings remain safe when seeking the state’s assistance. 

Rules Regarding Medicaid and Gift Giving in Texas and Arkansas

For many older adults, Medicaid has long been the only viable means to pay for long-term care without having to sacrifice their life savings. However, Medicaid is a federally-funded health care program originally designed to provide health care benefits only to low-income applicants, and that only extends assistance to individuals with an income below a certain threshold. 

Although giving away assets to friends and relatives could seem like a perfect solution to abiding by Medicaid’s income limits, both the federal government and state-level Medicaid agencies have rules that penalize applicants who “spend down” for the sole purpose of obtaining eligibility. 

Texas Rules on Medicaid Gifting 

Medicaid is a federal program, but benefits are typically approved and disbursed by state-run agencies. In Texas, the state Department of Health and Human Services (HHS) is responsible for reviewing Medicaid applications and ensuring that eligible beneficiaries receive assistance.

Under Texas’s Medicaid program, an applicant may only receive Medicaid benefits for long-term care if they meet the following criteria (as of 2024): 

  • For single applicants, the monthly income limit for Medicaid is $2,829. They cannot own more than $2,000 in countable assets. 
  • For married applicants applying for benefits jointly, the monthly income limit is $5,658, with assets capped at $3,000. 
  • For married applicants applying for benefits for only one spouse, the monthly income limit is $2,829 per applicant. The applicant-spouse may own assets of $2,000 per less, whereas the non-applying spouse is entitled to retain “Community Spouse Resource Allowance” assets of up to $154,140. 

Texas Medicaid has a 5-year look back period that applies to all applicants seeking benefits for Nursing Home Medicaid and Medicaid Waivers. This means when the agency reviews a new Medicaid application, officials assess the prospective beneficiary’s financial records for the previous five years. 

If, during the investigation, HHS believes an applicant has given away assets for the purpose of establishing Medicaid eligibility, they’re prohibited from receiving benefits for a “Penalty Period”. HHS uses a specific calculation based on the value of your gifted assets multiplied by a daily rate to determine the number of days an applicant is ineligible for Medicaid coverage for long-term care costs. 

Arkansas Rules on Medicaid Gifting

Arkansas’s Medicaid Eligibility Test sets strict income and asset limits for applicants, with different rules applying to beneficiaries who are single or applying as a married couple. In most cases, recipients must meet the following criteria (as of 2024): 

  • A single applicant seeking Medicaid benefits for institutional or nursing home Medicaid benefits cannot have an income that exceeds $2,829 per month, nor can they have assets assessed at more than $2,000. Similar rules apply for Medicaid Waiver and home care applicants. 
  • For married couples, if both spouses are applying for Medicaid institutional or long-term care benefits, they cannot have an income exceeding $2,829 per spouse, nor can they have assets valued at more than $3,000. However, if only one spouse is applying for benefits, then the non-applicant spouse is entitled to a “Community Spouse Resource Allowance” of up to $154,140 in assets. 

The Arkansas Medicaid Program also employs a 5-year look back rule when assessing an applicant’s income and assets. During the look back period, state Medicaid officials investigate the beneficiary’s financial history to determine whether any asset transfers were sold below market value or given as gifts. 

If an Arkansas Medicaid official believes that an applicant gave away assets to become eligible for Medicaid, they could prevent them from obtaining any Medicaid benefits for a pre-specified period of time. Similar rules apply to other transfers of assets, including sales made under fair market value—even certain transfers or sales to a spouse. 

5 Mistakes to Avoid When Trying to Qualify for Medicaid

Scrambling to establish qualification for Medicaid is understandable, especially when considering the costs of home care and assisted living. However, cutting corners could have unexpected consequences—and they could leave you ineligible for benefits and paying out-of-pocket for assistance. 

Before deciding to spend down or leave an early inheritance, make sure your plan doesn’t include any of these common Medicaid eligibility mistakes. 

1. Failing to Make a Good Action Plan 

It’s never too early—or too late—to plan for the possibility that you may eventually need long-term care. For younger adults, insurance plans and annuities provide a significant layer of protection against the loss of assets that spending down can entail. And, for individuals closer to retirement age, establishing a trust and making strategic investments protect critical funds from Medicaid’s look-back rules. 

2. Applying for Medicaid Too Early (Or Too Late)

Although there’s never a bad time to start planning, applying for Medicaid is a time-sensitive undertaking. If you apply too early, you risk losing your savings to long-term care costs—and, if you apply too late, you could imperil your spouse’s independence by using money that could’ve gone toward their Community Spouse Resource Allowance. 

3. Giving Away Assets Without Considering the Look Back Period 

Texas and Arkansas both have 5-year look back periods. Any unusual transfers made during this period can, and likely will, be scrutinized. Aside from potentially being hit with a Medicaid penalty period that delays your Medicaid benefits, you could be forced to pay taxes on transfers that were made for the apparent purpose of establishing eligibility. 

4. Missing Out on Exemptions

The government knows that the costs of long-term care are far too high for most families to afford—which is why many Americans have options for assistance that go beyond giving away their life’s savings. 

For instance, you can avoid an unnecessary spend down by: 

  • Making exempted transfers to a dependent with special needs
  • Setting up exempted transfers to a caretaker child
  • Establishing a disability trust for a Medicaid beneficiary under the age of 65
  • Creating a Medicaid trust that promises to repay the state for some of your care-related expenditures

5. Forgetting About Medicaid Estate Recovery Rules

Medicaid isn’t a no-strings-attached arrangement. Even if you do qualify for benefits, the state still retains the right to require repayment after your death. In some cases, this means the seizure of supposedly exempted assets, such as a primary home or certain personal possessions. You have options to protect your bank account and your home—but they all require some measure of planning. 

How Ross & Shoalmire, Elder Law Attorneys, Help You Secure Necessary Benefits

Ross & Shoalmire, Elder Law Attorneys, take pride in assisting families across Texas and Arkansas obtain the retirement they deserve—without having to sacrifice their savings or legacy. Our experienced team of Texarkana Medicaid planning lawyers could help you or a loved one explore solutions for Medicaid eligibility. Here’s our approach.

Assess Your Assets 

Medicaid doesn’t consider every asset when you apply for benefits. Instead, assets are either “countable” or “non-countable.” Understanding why certain assets below in which category is integral to ensuring that your Medicaid plan works to your advantage. 

Evaluate Your Expenses 

Arkansas and Texas might have look back periods intended to curb certain types of misrepresentation, but they also permit making necessary payments for legitimate purposes. Instead of scrambling to spend down, our attorneys help you strategize to allocate resources toward a good cause—such as the remaining mortgage on your home, an outstanding credit card balance, or a financed motor vehicle. 

Purchase Possessions That Don’t Count Against You

You’re also entitled to make purchases of non-countable assets during your look back period. Since Texas and Arkansas have broad definitions of what constitutes a non-countable asset, you could spend down by investing in home improvements, certain appliances, or even a new primary home. 

Invest in Annuities

An annuity might help provide your spouse with a fixed, lifelong income—without jeopardizing your eligibility for Medicaid benefits. 

Establish a Trust

Different types of trusts can help you or your spouse retain control over excess assets without gifting them to children or to charity. For example, a Medicaid Asset Protection Trust (MAPT) is a form of irrevocable trust. Any assets placed into a MAPT don’t count against you for Medicaid eligibility purposes, and can be used to safeguard an heir’s rights to a fair inheritance. 

However, Medicaid Asset Protection Trusts have some downsides, too—and are often only one part of a broader plan. Our Medicaid law professionals can explain what action to take and when.

John K. Ross IV
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John K. Ross helps clients in Texas and Arkansas with all matters of Elder Law including estate planning.