Medicaid Planning in New Jersey in NJ — Estate… | CGMIMM
Estate Planning · NJ
Medicaid Planning in New Jersey
New Jersey Medicaid planning combines federal Medicaid rules with state-specific eligibility, look-back periods, and asset-protection strategies for long-term care.
Published May 8, 2026
## Medicaid planning in New Jersey
**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 New Jersey 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.
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*This guide is general information about federal and New Jersey law as of early 2026 and is not legal advice. Medicaid rules change annually. Talk to a licensed New Jersey elder-law attorney about your specific situation.*
This guide is for general information only and does not constitute legal advice. Laws change and outcomes depend on your specific situation — talk to a licensed attorney before acting on anything you read here.