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Medicaid Crisis Planning

Sudden Changes and Big Decisions

Change is life’s only constant. Sometimes these changes strike without warning. If you or a loved one has experienced a sudden illness or serious accident, you understand how abruptly everything can change. Are you or a loved one suddenly in need of nursing home care? Finding and affording quality care on short notice can be stressful and draining. We can help you determine the best options for care and how to qualify for Medicaid to help finance them.

Long-term Care: Counting the Cost

Long-term care is expensive, and these costs only continue to increase as baby boomers age. According to the American Association for Long-Term Care Insurance, the annual cost of care will double in the next 20 years, increasing from $73,000 to $131,800. With improved medical care, the average life span of adults also is increasing; this translates into more years of care at increasingly higher rates. Without some sort of financial assistance, these costs could be financially devastating. In fact, your entire life savings could be quickly depleted within a few years of needing long-term care. This is where Medicaid can help.

Medicaid is a joint federal and state program to assist those with low income and limited resources. While Medicare provides very limited long-term care coverage, Medicaid is much more extensive. However, because of its restrictions, qualifying for Medicaid can be extremely difficult. But paying for a nursing home without it could be all but impossible.

The Medicaid Maze

Although Medicaid requirements vary from state to state, they all share one common element: complexity. Each state specifies a maximum allowed income for individuals and couples in order to qualify for Medicaid. Also, the applicant’s total assets cannot exceed a specified amount called the Individual Resource Allowance, which is consistently very low, often less than $2,000. Although certain possessions, like your home and automobile, are “exempted” for purposes of determining Medicaid eligibility, this figure is still alarming. If the applicant is married, the process becomes more complicated. For the recipient to qualify for Medicaid in any state, the applicant’s spouse can keep only half the couple’s assets up to a maximum of $119,220. So, if a couple has $119,220* in assets, they must “spend down” to all but $61,610 – $2,000 (or whatever the state Individual Resource Allowance is) for the applicant and $59,610 for the spouse – on long-term care.

What can you do if the value of your “non-exempt” assets exceeds the $119,220 limit? If you give your extra assets away, which seems like an obvious choice, you will encounter greater problems. Violating this “Transfer Penalty Rule” could disqualify you from receiving Medicaid for months or years, depending on how much you gave away.

If your need for nursing home care is immediate, time is not something you can afford to lose. Why? If you wait too long and your non-exempt assets fall below the maximum $119,220 limit, then the applicant’s spouse can only keep half of what is left … with $23,844 as the Minimum Community Spouse Resource Allowance. In other words, $59,610 truly is the Maximum Community Spouse Resource Allowance!

Medicaid Qualification Process: Finding the Way

This is only a brief and oversimplified review of a few Medicaid rules, of which there are myriad more. Navigating them on your own could be a nightmare at best and subject you to penalties at worst. Fortunately, though, our experienced professionals can guide you through the Medicaid maze. We can advise you throughout the application process, ensuring that you retain the maximum income and total assets allowed by law.


Seek appropriate counsel before you apply for and seek to qualify for Medicaid. We can give you – and your family – peace of mind during a difficult and uncertain time. When dealing with Medicaid, legal advice is something you cannot afford to go without.

* This amount (the “Community Spouse Resource Allowance”) is adjusted annually.

Annual Charitable Tax Deduction Planning

This option is an easy yet often underutilized tax saving strategy. If you are qualified to itemize your return, you can not only provide to your charity of choice but pay less in income tax as well. Your contributions can also help you avoid capital gains tax. You deduct the full value of highly appreciated assets avoiding the payment of capital gains you would have had to pay at their sale. Although there are limitations as to how much you can deduct each year, capital gains carry-over provisions allow you to take deductions every year until exhausted.

Bequests by Trust or Will Planning

One of the most common ways to leave money to charity at your death is by bequests, either in your will or your trust. These contributions are subtracted dollar for dollar from your estate tax liability and better yet, if properly executed, can reduce the income tax that must be paid by the beneficiaries of your IRAs and/or annuities.

Charitable Trust Planning

Charitable trusts come in two basic types: Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs).

Under a Charitable Remainder Trust (CRT), property or money is donated to a charity, but the donor continues to use the property and/or receive income from it while living. At the donor death, his beneficiaries continue to receive the income for a specific period of time. At the expiration of that term, the charity receives the remaining assets. The donor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the assets to be donated to the charity at the end of the term. In addition, the asset is removed from the estate, reducing subsequent estate taxes. While the contribution is irrevocable, if they wish to, the donor may retain control over the way the assets are invested. They can even change the identity of the charity as long as any named charity fits the IRS definition of a qualified charitable organization.

The Charitable Lead Trust (CLT) on the other hand, is a mirror image of a CRT. Instead of providing payments to the donor, with the remainder going to the charity, the CLT makes payments to the charity for a term of years. The remaining assets then go to whomever the donor designates, usually members of the donor’s family. Like the CRT, the charitable contribution made annually result in a charitable income tax deduction. The CLT provides an estate tax deduction as well. The CLT allows the donor to benefit the charity during their lifetime or immediately following their death with a series of payments before the remaining assets pass to family members at substantially reduced gift and estate tax cost.

The Social Conscience

There are many reasons that my clients prefer to avoid taxation. Rarely are they driven solely by a desire to acquire more wealth. With our national debt mounting, many question the fiscal responsibility of government. Others feel that bureaucracy by its nature breeds inefficiency and therefore feel their money will not be used to its best advantage. Still others have a social cause they are passionate about, one they have contributed to during their lifetime and want to continue to fund after their death. Whatever your reasons, charitable giving nurtures our fundamental need to give back to our society.

Making the Most of Your Charitable Giving in Virginia

We encourage and assist the tradition of giving to charitable causes. In addition to the many personal rewards inherent in making a charitable gift, most gifts also provide a current charitable income tax deduction. However, some also can save capital gains taxes, increase income, and provide you, or whomever you designate, with an income for life. Additionally, these types of gifts may provide an estate tax deduction — an important consideration in planning your estate.

If given the choice between paying taxes (involuntary philanthropy), or making a charitable gift (voluntary philanthropy), most people would choose the latter, because it gives them the benefit of knowing who the money will benefit and how it will be used. The same cannot be said for money paid to the U.S. Treasury. We help clients make charitable gifts and practice good stewardship in the most tax-efficient manner.

There are many different ways to make charitable gifts:

  • A charitable remainder trust or a charitable gift annuity will give you an immediate income tax deduction, a lifetime stream of income, and a waiver of capital gains taxes owed on contributed property.
  • A charitable lead trust creates an income stream to charity for a term of years with the remainder of the trust going to your children without any estate or gift tax consequences.
  • A private foundation offers you the considerable freedom to control amounts given by placing restrictions on how your gifts are used by charities.
  • A donor advised fund allows you to maximize your income tax savings on your regular monthly or weekly contributions to church or charities.

This has been a very general overview of a very complex subject matter. If there are causes or organizations you would like to support, while also maximizing your tax-saving strategies, please contact us to explore your options.

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Zaremba Center

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