FEDweek

Setting a Spend-Down Strategy

You (or a loved one) shouldn’t give away all of your assets if you think you’ll need nursing home care some day. Residents who can pay their own way have a wider choice of nursing homes because some facilities (often, the most desirable ones) don’t accept Medicaid enrollees.

In homes where Medicaid participants are accepted, “private-pay” residents may get better treatment. Thus, it’s generally best to give away some assets but keep some, too. You can enter the nursing home of your choice as a paying customer. Once you’ve spent down your assets to the Medicaid limits, you can apply for public assistance.

If you’ve chosen a nursing home that accepts Medicaid enrollees, you can stay in that home. The staff is not likely to know of your changed status so you’ll continue to receive first-class treatment.

Say Joan Walker has $120,000 in assets. She gives $60,000 to her children but keeps $60,000. Then she goes into a nursing home that charges $6,000 per month. During the next 10 months, Joan spends down her $60,000 on nursing home payments.

After the 10 months are up, she can apply for Medicaid, which will pay her ongoing nursing home bills. The nursing home is not likely to evict her and her family will have preserved the $60,000 in assets she transferred.