If you haven’t planned ahead for Indiana Medicaid, there are still some strategies available, such as the half and half plan, to avoid spending down all your assets.


Indiana Medicaid Eligibility


For better or for worse, Medicaid is the primary method of long term care coverage in the United States. But navigating the Medicaid system is complicated and confusing. Here are the basics.


Medicaid Coverage


Medicaid is a joint federal-state program that provides health insurance coverage to low-income children, seniors, and people with disabilities. In addition, it covers long-term care for those who qualify. This coverage has traditionally meant care in a nursing home, although coverage of care in an assisted living facility, adult day care, or at home are possible.

In the absence of any other public program covering long-term care (Medicare provides only limited nursing home coverage), Medicaid has become the default long-term care insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid.   However, obtaining Medicaid benefits to assist with long term care does not require an individual to be completely destitute.


Financial Eligibility- Asset Limitations


A common Indiana Medicaid misconception is that an applicant must be completely destitute to qualify for benefits. While the applicant must meet financial eligibility criteria to qualify, complete impoverishment is not required. In Indiana, Medicaid splits assets into two main groups: Exempt and Non-Exempt or “Countable.”  To be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in “countable” assets and the resident cannot have recently given away (or transferred) their assets. A spouse living at home may keep more.


The Problem with Gifting


The Medicaid recipient can give all their assets away as a gift. However, this creates a very expensive period of Indiana Medicaid ineligibility and all of those funds could still be depleted as the family pays for care.


The Penalty Period


Congress has imposed a penalty on people who transfer assets without receiving fair value in return. This penalty is a period during which the person transferring the assets will be ineligible for Medicaid. The penalty period does not begin until the person making the transfer has:

  1. moved to a nursing home or needs equivalent care in the community,
  2. spent down to the asset limit for Medicaid eligibility,
  3. applied for Medicaid coverage, and
  4. been approved for coverage

Over Resources


If a Medicaid applicant has excess assets they must be “spent down” until it’s gone and/or invested in an asset that does not count to qualify for Indiana Medicaid.

Exempt Planning- The Upside


One option is to convert the excess funds to a non-countable (exempt) asset under the Medicaid program. Simply put, if an Indiana Medicaid applicant had $100,000 of countable assets, they could reinvest these assets in an asset that is exempt under the Medicaid program. For example, they could use their countable assets to purchase income-producing real estate which is exempt under the Medicaid program so long as it meets certain criteria. Then they have a source of funds (the equity in the real estate) in addition to their Medicaid benefits.

Exempt Planning- The Downside


The downside to this plan is that Indiana Medicaid has a priority claim against the real estate upon the death of the Medicaid recipient. Nonetheless, to the extent that any asset may be exposed to estate recovery or lien, the amount that the State recovers is still usually far less than what would have been paid if Medicaid were not assisting. This results from a substantial “discount” given to Medicaid that is not given to private-pay patients. Other examples of assets that are exempt include one car, personal items, income-producing property, some pre-paid funeral plans, and certain US Savings Bonds.

Half a Loaf


Because of Medicaid’s right to recover assets of the recipient at his or her death, a better option for most single individuals seeking Medicaid assistance is to divide his or her estate into two shares, the “Gifted Share” and the “Nursing Home Share.” So-called “half a loaf” approaches (what our firm has termed “half and half” plans) allow a Medicaid applicant to give away some assets while still qualifying for Medicaid.

Indiana Medicaid applicants who want to preserve some assets have a couple of options:


  • Promissory note. The person in need of long-term care gives half of his or her funds to the resident’s children (or other family members) and lends them the other half under a promissory note that meets certain requirements in the Medicaid law. The resident uses monthly repayments of the loan, along with his or her income, to pay nursing home costs during the penalty period.
  • Annuity. The person in need of long-term care gives half of his or her funds to the resident’s children (or other family members) and uses the remaining assets to buy an immediate annuity. Income from the annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short-term, just long enough to cover the penalty period.


Although the gifted share is subject to a Medicaid transfer of assets penalty, it will be preserved for the beneficiaries of the individual’s estate plan. The nursing home share will be used to provide a stream of income to pay the nursing home bill through the penalty period. In general, this plan protects about 50% of the individual’s estate.


Planning for Medicaid

Planning for Medicaid and navigating the Medicaid application process is complicated and can be daunting.  For expert assistance understanding Indiana Medicaid laws, contact Stinson Law Firm for assistance. Our Indiana Medicaid attorneys will guide you through the steps you should take to protect the family members you love.

How our Indiana Medicaid Attorneys Can Help

If you live in Indiana and need assistance handling the Medicaid process, the legal team at Stinson Law Firm can help. Our Indiana Medicaid Attorneys have helped hundreds of Indiana residents get through the Medicaid process. An experienced attorney can explain everything you need to know about Medicaid eligibility in Indiana, and how to manage finances to maintain eligibility and prevent you from unnecessarily spending your resources.  Many times, we can help you preserve most of the person’s assets while expediting the payment of Indiana Medicaid benefits for a person in a nursing facility.

Let our Medicaid attorneys provide you peace of mind with care and compassion. 

Related Blogs:

In Need of Assisted Living?  How to Protect Assets through the Medicaid Half and Half Plan

Medicaid Help with Long-Term Care – Exempt Planning

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