Asset Exchange Plan
The asset exchange strategy is a powerful strategy if used correctly.

Married - One Spouse Confined
In a situation where one spouse is confined to a Nursing Home and the other spouse is living in the Community, exchanging an asset for an income stream in the name of the Community spouse works extremely well.

This strategy is based on two rules set out by the legislation that provides for the Medicaid ICP program. The first rule is that assets transferred between spouses is allowable without creating an ineligible transfer. The second rule is that the community spouse can have unlimited income without affecting the eligibility of the confined spouse.

To better understand the power of this concept, let’s look at an example:

If Joe applies for Medicaid on Martha’s behalf with the above assumptions, Martha will be denied benefits because Joe and Martha’s combined assets are substantially above the Community Spouse Resource Allowance (CSRA) of $99,540.00

If however, Joe transferred all of the $91,360.00 in excess assets into his name only and then purchased a rental property (which has been set up correctly to meet the requirements of the State ICP program) and he received rental income of fair market value, Martha could then qualify for Medicaid immediately.

Martha’s $500.00 in monthly Social Security would go towards the Nursing Home expense. However, all of Joe’s income could be kept by Joe. This income would include Joe’s Social Security, Military Pension and the Rental Income. Therefore, the only loss is the $500.00 per month of Martha’s Social Security.

In short, we protected the $91,360.00 by converting it to an income stream and Martha is getting the care she needs for a grand total of ONLY $500.00.

Single

This strategy can also work for a single person for asset protection purposes.  Rental real estate can be purchased and the real estate itself is exempt.  The income will have to go to the nursing home but if the rental property is deeded correctly, it will pass to the heirs at death without being subject to Estate Recovery Liens.

It is important that the rental property deed is properly drafted by a competent real estate attorney.  Otherwise, the property will go through probate or the expanded definition of probate and be subject to Estate Recovery from the State Medicaid Program.