Medicaid Planning FAQs

Medicaid is a joint federal and state program that covers medical costs, including long-term nursing home care, for individuals who meet specific financial eligibility requirements. In Minnesota, the program is often referred to as Medical Assistance (MA).

Because Medical Assistance is a needs-based program, you cannot qualify if your income or countable assets exceed the strict limits set by the state.

Medicaid planning involves legally restructuring your assets ahead of time so they are not counted against you during the application process. This allows you to qualify for benefits without first forcing your family into poverty.

This is one of the most common points of confusion for seniors. Medicare is an entitlement program available to most citizens over the age of 65, regardless of their wealth.

However, Medicare does not pay for long-term custodial care, which includes standard nursing home stays, help with daily living activities, or long-term memory care. Medicare will only cover up to 100 days of skilled nursing or rehabilitation care following a qualified hospital stay.

Medicaid, or Medical Assistance, is the primary government program that covers long-term custodial care indefinitely. To receive this coverage, you must meet the program’s strict asset and income limitations.

When you apply for Medical Assistance to cover long-term care, the state of Minnesota reviews all financial transactions, asset transfers, and gifts you made during the five years immediately preceding your application date. This timeframe is known as the five-year look-back period.

If the state finds that you gave away money, sold property below market value, or transferred assets to family members for less than fair market value during those five years, a penalty period will be imposed.

During this penalty period, Minnesota will refuse to pay for your long-term care, leaving you to pay the nursing home out of pocket. The duration of the penalty depends entirely on the total value of the uncompensated assets you gave away.

No, Minnesota separates your property into “countable” and “non-countable” (or exempt) assets. Countable assets include cash, checking and savings accounts, certificates of deposit, stocks, bonds, mutual funds, and secondary real estate.

Exempt assets generally include your primary residence (up to a specific equity limit, provided you or a spouse intend to return to it), one personal vehicle, household goods, personal effects, and certain prepaid burial plots or irrevocable funeral trusts.

Proper Medicaid planning focuses on converting countable assets into non-countable assets legally.

If one spouse needs to enter a nursing home while the other remains at home, special rules apply to protect the community spouse from financial ruin. These are known as the spousal impoverishment protections.

Minnesota allows the healthy community spouse to keep a specific portion of the couple’s combined assets, known as the Community Spouse Resource Allowance (CSRA). The state also ensures the community spouse can retain a minimum monthly income, called the Minimum Monthly Maintenance Needs Allowance (MMMNA). If the healthy spouse’s independent income falls below this threshold, a portion of the institutionalized spouse’s income can be legally transferred to them.

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust designed specifically to shield your assets from being counted by the state or consumed by nursing home costs. By transferring your property, investments, or real estate into this trust, you remove those assets from your personal financial sheet.

Because the trust is irrevocable, you cannot act as the trustee or withdraw the principal for yourself, though you can still receive the income generated by the trust assets. Crucially, because of the five-year look-back rule, this trust must be established and funded at least five years before you anticipate needing to apply for Medical Assistance.

Many people believe that if their home is exempt during their lifetime, it is completely safe from the state. However, Minnesota has a mandatory Medical Assistance Estate Recovery Program.

After an MA recipient passes away, the state has the legal right to file a claim against their probate estate to seek reimbursement for all long-term care costs paid on their behalf. This often forces the family to sell the family home to pay back the state. Implementing proactive estate planning tools, such as specific trusts or life estate deeds, can shield your home from this recovery process entirely.