Medicaid Pre-Planning
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MEDICAID PLANNING
Medicaid Pre-Planning in Kentucky
Medicaid pre-planning is what you do when nobody needs care yet. It is deliberately unglamorous work, and it protects more than every crisis technique combined, for the simple reason that it has time on its side.
The whole discipline turns on one rule. Kentucky reviews transfers made in the sixty months before a Medicaid application. Assets moved outside that window are not part of the review. Plan five years ahead and the look-back has nothing to look at.
Nobody wants to think about a nursing home while they are healthy. That reluctance is the single greatest cost in elder law, because the families who wait until the need is visible have already forfeited the most effective planning available to them.
This is the work worth doing while nothing is wrong. Call (502) 348-2108 for a free consultation with attorney Thomas Hamilton.
What Medicaid Pre-Planning Is
Medicaid pre-planning is the repositioning of assets, well in advance of any need for long-term care, so that they are preserved for a spouse and family rather than consumed by nursing home costs, while remaining within the eligibility rules rather than around them.
It typically centres on an irrevocable trust designed for the purpose, holding the home and selected assets, combined with attention to how everything else is titled and a power of attorney containing the authority an agent would need to carry the plan forward.
The distinction from crisis planning is entirely one of timing. Crisis planning works within the sixty-month look-back using more technical and more limited tools. Pre-planning steps outside it altogether. Both are legitimate; one is far more effective. See Medicaid crisis planning for what applies when care is already needed.
How the Sixty-Month Look-Back Works
Everything about the timing of this work follows from one rule, and it is worth understanding precisely rather than approximately.
The review period and the penalty
When a Kentucky Medicaid application is made for long-term care coverage, the agency examines transfers made during the sixty months preceding the application. Assets given away, or sold for less than fair market value, during that period can produce a penalty period during which Medicaid will not pay for care. The penalty is calculated by reference to the value transferred.
Why the penalty timing is so punishing
The penalty does not run from the date of the gift. It begins when the applicant is otherwise eligible and actually needs care. That means a transfer made four years ago does not quietly expire; it produces a period of ineligibility starting at the moment the family most needs coverage, when savings are already gone and the facility still expects payment. This is why well-intentioned gifts to children are so often the worst thing a family can do.
A transfer completed more than sixty months before the application sits outside the review entirely. There is no penalty because there is nothing in the window to penalise. The whole argument for early planning is contained in that sentence.
What Pre-Planning Involves
A Medicaid asset protection trust
An irrevocable trust holding the home and selected assets. You typically retain the right to live in the home and to receive income, while giving up the power to revoke the trust or spend the principal. See Medicaid asset protection trusts.
Deciding what stays accessible
Not everything should go into a trust. Liquidity matters, and a plan that leaves a client unable to meet ordinary expenses is a bad plan regardless of what it protects.
The home, handled deliberately
For most Kentucky families the house is the main asset. How and when it moves determines both the Medicaid treatment and the capital gains position for the children who inherit it.
Titling and beneficiary review
Joint accounts, survivorship language and beneficiary designations each behave differently under the eligibility rules, and rarely the way people assume.
Powers of attorney with express authority
The KRS 457.245 powers for gifting, beneficiary changes and creating or funding a trust. Without them an agent cannot continue the plan if capacity is lost midway.
Planning for estate recovery
Eligibility is only half the problem. Kentucky recovers from estates after death, and under a broad definition, so the plan has to address that too.
Kentucky Estate Recovery Is Broader Than You Think
Qualifying for Medicaid is not the end of the story. Kentucky seeks reimbursement after death from the estates of people who received long-term care benefits, and it does so under a definition of estate that reaches well beyond probate.
907 KAR 1:585 defines estate to include all real and personal property that would pass as probate property, and in addition all property in which the recipient held legal title or an interest at the time of death, to the extent of that interest, whether it passed to a survivor, heir or assign through joint tenancy, tenancy in common survivorship, life estate, living trust or other arrangement.
The consequence is significant and widely misunderstood. The standard national advice that a life estate deed, a joint tenancy or a revocable living trust will keep the family home beyond the reach of estate recovery does not hold in Kentucky as the regulation is written. Kentucky adopted the expanded definition and named those arrangements in it.
A pre-planning strategy that ignores recovery may achieve eligibility and still lose the house afterwards. Properly structured irrevocable trust planning addresses both, which is a further reason this work rewards being done carefully and early.
Who Should Be Doing This Now
If you recognise your household here, the window is open. It will not stay open.
01
Healthy adults in their sixties
The ideal moment by a wide margin. Capacity is not in question, the sixty months can run out completely, and the plan can be built calmly with the family informed rather than assembled in an emergency.
02
Anyone with a family history of dementia
A realistic prospect of a long and expensive period of care is precisely the circumstance advance planning exists to meet.
03
Couples worried about the survivor
Care costs for one spouse can consume the resources meant to support both. Protecting the spouse who remains at home is far more achievable years in advance than in the weeks after an admission.
04
Families with land, a farm or a business
Illiquid assets are especially exposed, because they cannot be partly spent. They need a plan that accounts for how they will actually be held and transferred.
05
Anyone who has already made gifts
If money or property has been given away in the last five years, that transfer is already inside the look-back. Knowing where you stand is better than discovering it during an application.
Every year of delay reduces what can be protected at no cost. Call (502) 348-2108 while the clock is still on your side.
What You Keep, and What You Give Up
Effective Medicaid pre-planning requires giving up some control, and we would rather be direct about that than have you discover it later. Any adviser who says otherwise is describing something that does not work.
A revocable trust protects nothing. Because you retain the power to revoke it, the assets remain yours for eligibility purposes and remain reachable. KRS 386B.5-020 confirms that a self-settled spendthrift interest is subject to alienation by operation of law or legal process. Protection requires genuine irrevocability.
In a typical structure you keep the right to live in your home for life and to receive income generated by trust assets. What you give up is the ability to revoke the arrangement and to reach the principal freely. The trustee, usually a trusted child, holds and manages it under terms you set at the outset.
That trade suits many families and not all. Where assets are modest, or where liquidity may be needed, the honest answer is sometimes that this planning is not worth doing. We will say so.
- You generally retain the right to live in the home for life
- You generally retain income from trust assets
- You give up the power to revoke and to spend the principal
- The trust must be funded, by deed and retitling, to have any effect
- Full protection arrives once sixty months have passed
- Your agent needs express KRS 457.245 powers to continue the plan
- The plan should be reviewed as circumstances and figures change
Medicaid Pre-Planning in Bardstown and Louisville
Thomas Hamilton has been admitted to the Kentucky bar since 2011 and has concentrated on elder law since 2014. He is a member of the Kentucky Bar Association Elder Law Section and the National Academy of Elder Law Attorneys, and he handles this planning personally.
We work with families throughout Nelson, Bullitt, Washington, Marion, Larue, Hardin, Anderson, Spencer and Jefferson counties, from 117 E. Stephen Foster Avenue in Bardstown and the First Trust Centre, 200 S. 5th Street in Louisville.
The initial consultation is free and includes a straight answer about whether this planning is worth doing in your circumstances. Schedule a consultation or read more about Medicaid planning.
Mistakes That Defeat Pre-Planning
Waiting for a reason to plan
The reason, when it comes, is what closes the window. Sixty months of clear air cannot be created after the fact.
Giving the house to the children outright
It creates a transfer penalty, exposes the property to the children creditors and divorces, forfeits the step-up in basis, and leaves the parent with no legal right to remain. A trust achieves the intention without any of it.
Using a revocable trust for protection
Revocable means countable. It is a good probate tool and it protects nothing from care costs.
Relying on a life estate deed to beat estate recovery
907 KAR 1:585 names life estates expressly. The deed has legitimate uses, but not that one.
Signing the trust and never funding it
An unfunded trust protects nothing at all. The deed must be recorded and the accounts retitled.
Small gifts nobody thought to mention
Helping a grandchild with tuition or a car is a transfer for look-back purposes. These are rarely disqualifying, but they need to be known about and documented rather than discovered during an application.
FREQUENTLY ASKED QUESTIONS
Common Questions About Medicaid Pre-Planning
What is the Medicaid five-year look-back period?
When a Kentucky Medicaid application is made for long-term care, the agency reviews transfers made in the sixty months before the application. Assets given away or sold for less than fair value in that window can create a penalty period during which Medicaid will not pay for care. Crucially, the penalty begins when the applicant would otherwise be eligible and needs care, not when the gift was made.
Do I have to be completely broke to qualify for Medicaid?
No. Medicaid has asset and income limits, but a number of resources are treated differently, and specific protections exist for a spouse who remains at home. The figures are adjusted annually, so we work from current numbers at the time of an application. Proper planning is about arranging affairs within the published rules, not about impoverishing a household.
Will Medicaid take my home?
Not during your lifetime as a condition of eligibility, but Kentucky does seek recovery from estates after death. Kentucky uses an expanded definition of estate under 907 KAR 1:585 that reaches beyond probate property to interests passing through joint tenancy, life estates and living trusts. That is why a plan needs to address recovery as well as eligibility, and why the common national advice on this point does not fit Kentucky.
Can I protect assets if I may need nursing-home care in the future?
Yes, and this is the most effective planning available. Assets transferred into a properly drafted irrevocable trust more than sixty months before an application fall outside the look-back entirely. The trade-off is genuine irrevocability: you keep the right to live in your home and to receive income, but give up the ability to revoke the trust or spend the principal.
Is asset protection only for wealthy families?
No, and in practice the opposite is closer to the truth. Families with substantial wealth can often absorb several years of care costs. It is households with a home and modest savings, where care costs would consume everything within a few years, for whom this planning makes the greatest proportional difference.
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Start the Five-Year Clock Today
The most valuable thing in Medicaid planning is time, and it is the one thing we cannot create for you later. Schedule your free consultation with attorney Thomas Hamilton. Call (502) 348-2108 or use the form below.
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117 E. Stephen Foster Avenue, Bardstown, KY 40004