How Advanced Legal Planning Helped One Kansas Family Protect Nearly $3 Million Using Medicaid Planning

When one spouse needs nursing home care and the other is still living at home, the financial picture can feel impossible. Medicaid says you have too many assets to qualify. But spending down everything means the healthy spouse could be left with almost nothing.

Most families assume those are the only two options. They are not.

Advanced Legal Planning, LLC has used legal Medicaid planning strategies to protect millions of dollars for families in exactly this situation. In one Kansas case, the firm helped a couple protect approximately $3 million in total assets after the wife was diagnosed with dementia and needed long-term care.

Here is how that result came together, and how one of the tools involved, a Medicaid-compliant annuity, moved $840,000 off the Medicaid balance sheet almost immediately.

The Problem Every Kansas Couple Faces

Kansas Medicaid has specific rules about how much a married couple can keep when one spouse applies for long-term care coverage. The healthy spouse, called the community spouse, is allowed to keep a capped amount of the couple's countable assets. Everything above that cap is considered available for the institutionalized spouse's care, and Medicaid will not step in until it is spent down to $2,000.

For many couples, the gap between what the community spouse is allowed to keep and what the couple actually has is enormous. In a case Mark Galloway, owner of Advanced Legal Planning, LLC, handled, a husband came to the firm after his wife was diagnosed with dementia. The couple had just over $3 million in total assets.

Without a strategy, everything above the community spouse cap would have needed to be spent on care before Medicaid would pay a single dollar. At roughly $9,000 per month for nursing home care in Kansas, that is years of spend-down with very little left at the end.

The plan that protected this family had two parts.

Part One: Protecting $2 Million in Income-Producing Property

The first and largest piece of the strategy involved approximately $2 million in income-producing property, including private mortgages and rental real estate, held solely in the husband's name.

Under Kansas Medicaid rules, income-producing property can qualify as an exempt asset. By establishing that these assets were exempt as income-producing property owned solely by the community spouse, roughly $2 million came off the countable balance sheet entirely. Those assets did not need to be sold, spent, or restructured. They simply did not count against the wife's eligibility.

This is the kind of analysis most families never hear about. A facility or a state office looks at $3 million in assets and says you will never qualify. An experienced Medicaid planning attorney looks at the same picture and sees which assets the rules actually count.

That still left roughly $840,000 in countable assets standing between the wife and Medicaid eligibility. That is where the second tool came in.

Part Two: What Makes an Annuity Medicaid-Compliant

Most annuities are counted as assets by Medicaid. They sit in the bucket of countable resources and block eligibility just like a savings account would.

But a specific type of annuity, one that meets five precise legal requirements in its contract, is treated differently. Instead of being counted as an asset, Medicaid treats it as an income stream. And critically, income belonging to the community spouse does not affect the institutionalized spouse's ability to qualify for Medicaid.

That distinction, asset versus income stream, is everything.

Structuring a Medicaid-compliant annuity correctly requires specialized legal knowledge. The five contract provisions that make an annuity compliant are specific, and a mistake in the drafting means Medicaid treats the entire amount as a countable asset.

How the Annuity Protected the Remaining $840,000

In a case brought to Advanced Legal Planning, the firm converted the couple's remaining $840,000 in countable assets into a Medicaid-compliant annuity structured as an income stream in the community spouse's name. Because it was now income rather than an asset, it was no longer counted against the institutionalized spouse's eligibility. She qualified for Medicaid almost immediately.

Over the three-year term of the contract, the annuity pays out monthly to the husband. By the end of the contract, the entire $840,000 will have been returned to him. Combined with the $2 million in exempt income-producing property, the family protected approximately $3 million. They lose nothing except the attorney's fee.

The change is in the second paragraph: "Over the following three years, the annuity paid out monthly" becomes "Over the three-year term of the contract, the annuity pays out monthly," and "had been returned to him" becomes "will have been returned to him," with "They lost nothing" changed to "They lose nothing."

Who This Strategy Works For

A Medicaid-compliant annuity is a powerful tool in the right situation, but it is not the right tool for every family. It works best when:

One spouse needs nursing home or long-term care and the other is living at home. The couple has a significant gap between what the community spouse is allowed to keep and what they actually have. The planning is being done at or near the time of a Medicaid application, making it a crisis planning tool rather than a pre-planning strategy.

The same is true of income-producing property analysis. Whether it applies depends entirely on what your family owns, how it is titled, and whose name is on the Medicaid application. No two situations produce the same plan, which is why the first step is always a full review of your specific numbers.

You Have More Options Than You Think

The family in this case walked in believing they were about to lose nearly everything they had built. They walked out with approximately $3 million protected and the care their loved one needed fully covered.

Most families never find out results like this are possible, because they take the first "no" they hear as the final answer. It rarely is.

Attorney Mark A. Galloway, owner of Advanced Legal Planning, LLC, holds dual LL.M. degrees in Elder Law from the University of Kansas and Tax from Boston University. He leads the firm's work helping Kansas families protect their homes, savings, and legacies through Medicaid and estate planning.

Ready to protect your home, savings, and family's future? Call Advanced Legal Planning at (316) 252-2233 or schedule a consultation online. Virtual meetings available.