Protecting your assets from Medicaid spend-down is legal and common — but only when done correctly and early, with the right tools.
What are the main ways to protect assets from Medicaid?
Several legal strategies can protect assets from being spent on long-term care. The most common is a Medicaid asset protection trust — an irrevocable trust funded at least 5 years before you apply. Married couples benefit from the community spouse resource allowance, which preserves assets for the at-home spouse. Other tools include converting countable assets into exempt ones (paying off the mortgage, home repairs, prepaid funerals), Medicaid-compliant annuities that turn assets into an income stream, and properly timed gifting. The right mix depends on your age, health, marital status, and state. None of these work as a last-minute fix — early planning is what makes protection possible.
What asset-protection mistakes should you avoid?
The biggest mistake is acting too late. Transferring or gifting assets within 5 years of applying triggers Medicaid's look-back penalty, delaying coverage. Another error is using a revocable living trust — Medicaid still counts those assets. Adding a child's name to your home or bank account can also backfire, creating gift-tax and look-back issues. And spending down recklessly wastes money you could have preserved. Because Medicaid rules are detailed, change yearly, and vary by state, DIY planning often costs families more than it saves. Call 1-800-MEDIGAP to get pointed toward qualified elder law guidance before you move any assets.