Goal of Medicaid Planning

Similarly, the goal of Medicaid planning is to avoid spousal impoverishment and the depletion of the inheritance that would pass to the children. In 1988, the United States Congress passed the Spousal Impoverishment Act, which together with the Omnibus Budget Reconciliation Act of 1993, provide the legal means to qualify for Medicaid nursing home care without completely “going broke”.

The difference between tax planning and Medicaid planning is that tax planning involves one body of federal tax law, which varies little from state to state. However, since the states pay 50% of Medicaid benefits, each state enacts their own rules to administer the Medicaid program. Thus, a client may qualify for Medicaid under the Florida rules by investing in certain acceptable types of annuities, but then be moved by their child to their child’s northern state and find they are ineligible for Medicaid, but have no available assets to pay their nursing home costs due to their prior investment and planning decisions.