## Medicaid planning in Illinois **Medicaid** pays for long-term care that Medicare doesn't — nursing homes, assisted living (in some states), home care. But it's means-tested. **Medicaid planning** is the legal strategy to qualify for Medicaid while preserving family assets. ## The 5-year look-back rule **Federal Medicaid rule:** Medicaid reviews 5 years of financial transactions before application: - Gifts / transfers below market value during this period are penalized - Penalty = period of Medicaid ineligibility - Penalty = (gift amount) ÷ (state Medicaid penalty divisor) - Begins when person otherwise qualifies ("penalty period" can leave gap with no Medicaid + insufficient money) ## Medicaid eligibility limits **For nursing-home Medicaid:** - **Income** — typically $2,901/month (2024 for individual) - **Assets** — typically $2,000 individual / $3,000 couple - **Spousal protection** — community spouse keeps significantly more **Exempt assets** (don't count toward limit): - Primary residence (up to ~$1.097M home equity in most states for 2024) - One vehicle (any value) - Personal effects - Burial plots / pre-paid funeral - Life insurance with cash value < $1,500 (face) - Some retirement accounts (in payout status, varies by state) - Income-producing property (limited) - Certain trust assets ## Spousal protection When one spouse needs long-term care + the other (community spouse) doesn't: **Community Spouse Resource Allowance (CSRA):** - Community spouse can keep up to ~$157,920 (2024) - Or 50% of total countable assets, whichever is greater - State-specific minimums **Monthly Maintenance Needs Allowance (MMNA):** - Income from institutionalized spouse can be transferred to community spouse if needed - Up to ~$3,948/month (2024) ## Common Medicaid planning strategies **1. Spend-down planning.** Pay down debts, prepay funeral, buy exempt assets, make home improvements before applying. **2. Spousal refusal (in some states like NY, CT, FL).** Community spouse refuses to support institutionalized spouse; Medicaid pays; state pursues recovery from refusing spouse. **3. Medicaid-compliant annuities.** Convert excess assets into income stream that doesn't count as resources. Strict requirements (irrevocable, actuarially sound, state as remainder beneficiary). **4. Caregiver agreements.** Pay family caregiver for documented services. Reduces assets without triggering penalty. **5. Personal services contracts.** Similar to caregiver agreements with broader services. **6. Promissory notes.** Convert assets to legitimate loan that pays back over time. **7. Irrevocable Medicaid Asset Protection Trust.** Transfer assets 5+ years before application; trust assets protected; income beneficiary while donor lives. **8. Transfers to disabled child.** Transfers to a disabled child of any age are NOT penalized. **9. Transfers to spouse.** Generally NOT penalized. **10. Half-a-loaf strategy.** Combination of gifting + Medicaid annuity to optimize savings. **11. Primary residence exemption.** Maintain home; protected up to state limit. **12. Life-estate planning.** Grant remainder interest to children; retain life estate; not counted as gift after 5 years. ## Common pitfalls - **Late planning** — many strategies require 5-year lookback period; don't work in crisis - **Gifts within 5 years** — trigger penalty period - **Improper trusts** — not all trusts protect assets; revocable trusts don't - **Self-help** — DIY planning often fails or backfires - **Medicaid recovery (estate recovery)** — state seeks recovery from estate after death - **Spousal denial** — community spouse may not have access during application processing ## Medicaid estate recovery Federal law requires states to seek recovery against estates of deceased Medicaid recipients (those 55+) for nursing-home costs paid by Medicaid: - **MERP (Medicaid Estate Recovery Program)** - Recovery from probate estate (most states limit to probate) - Some states extend to non-probate property (joint, life-estate, trust) - Hardship exemptions - Surviving-spouse / minor-child exemptions ## Long-term care insurance vs Medicaid planning **LTC insurance:** - Pay premiums while healthy - Insurance pays for care - Avoid Medicaid concerns - Premiums expensive + can increase **Medicaid planning:** - Strategy to qualify for government help - No premiums - Sacrifices control over assets - Bureaucratic system Many families combine: LTC insurance for first years; Medicaid backstop if insurance runs out. ## Medicaid waivers (HCBS) **Home and Community-Based Services (HCBS) waivers:** - Pay for care AT HOME instead of nursing facility - Less restrictive on income / assets - Long waiting lists in many states - More flexible options ## What you should do Medicaid planning requires SPECIALIZED counsel — elder-law attorneys, not general estate planners. Most Illinois elder-law attorneys offer paid initial consultations. Plan AT LEAST 5 years before need; emergency planning is more limited and expensive. National Academy of Elder Law Attorneys (NAELA) maintains directory. --- *This guide is general information about federal and Illinois law as of early 2026 and is not legal advice. Medicaid rules change annually. Talk to a licensed Illinois elder-law attorney about your specific situation.*