Asset Protection Strategies for Seniors: Wisconsin Medicaid Eligibility when a Crisis Occurs – Funeral Expense Trusts

We’ve all heard the staggering numbers. Everyday more than 10,000 Baby Boomers turn 65. Many seniors in this population will eventually need nursing home care. As a result, long-term care for Wisconsin seniors in skilled nursing facilities is in increasing demand and will further explode in the coming decades. Unfortunately, when the need arises, many seniors and their families are unprepared to pay the skyrocketing costs for nursing home care. Skilled nursing facilities can cost anywhere from $10,000 to $15,000 a month, which will quickly deplete a lifetime’s worth of savings for most seniors.

Medicaid Eligibility for Seniors

Medicaid (or Title XIX) is a joint federal and state program for seniors who need long-term care but cannot afford to pay for it. In addition to physical eligibility requirements, seniors must also meet financial-need requirements. For example, a single person can retain no more than $2,000 in cash assets. If married, the Medicaid applicant’s spouse (the “community spouse”) can generally keep up to half of the couple’s cash assets, up to around $148,000. Income is limited for the Medicaid applicant, but essentially unlimited for the community spouse. There are limited exemptions for a home, a vehicle, personal property, and life insurance policies valued at $1,500 or less, among others.

Medicaid has a Five-Year “Lookback” Rule, which assesses an ineligibility time penalty (for otherwise eligible seniors) for any “divestments” made in the last five years prior to the Medicaid application date. Gifting or transferring assets for less than fair market value is typically considered a divestment under the Medicaid rules.

Often, seniors find themselves in urgent need of Medicaid eligibility due to a catastrophic fall, heart attack, stroke, or other health condition that has suddenly rendered them unable to take care of their own basic needs. Sadly, many seniors in this category did not consider the potential need for Medicaid in their estate plans.

What happens when a widowed or single senior faces a critical need for Medicaid long-term care services? Is it too late to protect assets for their families? Not necessarily.

Although it is generally always a good idea to at least consider the potential need for Medicaid when formulating an estate plan, there are several strategies to protect assets for your family members. These strategies can also accelerate Medicaid eligibility, often resulting in savings of thousands of dollars.

Wisconsin Irrevocable Funeral Trusts for Title XIX Planning

Irrevocable Funeral Trusts with a face value of up to $15,000 are commonly considered exempt for Medicaid applicants, spouses, and their children. Purchasing an irrevocable funeral trust with otherwise unexempt cash or insurance policies for yourself, spouse, and your children enables the applicant to spend down their assets significantly to reach the $2,000 limit.

Unfortunately, the funeral trust spenddown strategy does not always eliminate enough unexempt assets to reach the $2,000 eligibility marker, especially for unmarried or widowed seniors who are not able to exempt or transfer their homes, vehicles, or other assets to their spouse.

This is where the attorneys at Schloemer Law Firm in West Bend can assist the Medicaid applicant and their families to (1) spenddown the remaining assets in a practical way, and (2) pass down a significant portion of those assets to loved ones and still achieve Medicaid eligibility. Please reach out to one of our Estate Planning attorneys by contacting our office at [email protected] or 262-334-3471.

If you have questions or are looking for a Wisconsin elder law attorney, please reach out to this article’s author Attorney Michael J. Keepman at 262-334-3471 or [email protected], or one of our Estate Planning attorneys by contacting our office at [email protected] or 262-334-3471. Our Wisconsin elder law attorneys frequently provide legal services to clients living in West Bend and the surrounding communities of Slinger, Germantown, Kewaskum, Port Washington, Menomonee Falls, Milwaukee, and throughout Washington County, Sheboygan County, Dodge County, Ozaukee County, Waukesha County, Wisconsin.

Originally published: August 10, 2023.


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Disclaimer: The information contained in this post is for general informational purposes only and is not legal advice. -Due to the rapidly changing nature of law, Schloemer Law Firm makes no warranty or guarantee concerning the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your unique circumstances before deciding to take—or refrain from taking—any action.  If you need legal guidance, please contact us at 262-334-3471 or [email protected].