Medical costs, as well as assisted living and nursing home costs, are higher than ever before, and expected to rise even more in the future. For many aging adults, that presents a terrifying prospect.

You can either go bankrupt attempting to pay these high costs yourself or you can try to qualify for Medicaid. Depending on which state you live in, you are limited to “countable assets” of no more than $2,000 in order to be eligible for Medicaid. This means you have to “spend down” those countable assets.

What are Countable Assets?

Fortunately, the government does not consider all assets as “countable.” This means that you can have some assets and remain eligible for Medicaid. Any of the following are considered countable assets:

• Cash
• Bank accounts or deposits
• IRAs and similar retirement accounts
• Securities
• Cash surrender values from life insurance policies

The key is to spend down the countable assets so that you’re within acceptable limits for Medicaid eligibility for entering a nursing home or assisted living facility without accidentally accumulating more countable assets in the process. These are a few steps you can take that might help that includes spending down using exempt expenditures, such as:

• Buying a new home.
• Paying off a mortgage.
• Investing in the home (remodel, landscape, new roof, improvements, etc.).
• Updating your furnishings, appliances, or personal belongings.
• Investing in pre-paid burial assets.
• Paying off certain non-medical debts.
• Paying medical bills.
• Paying for personal hygiene expenses, such as haircuts, pedicures, and manicures.
• Purchasing medical equipment.
• Buying new clothes.
• Purchasing a new car.
• Going on a vacation.
• Paying for entertainment (books, movies, sporting events, shows)
• Investing in life insurance with a face value of $1,500 or less.

While it might be fun to buy new things for your home, it can also be frightening to spend down funds after a lifetime of savings. While spending down these funds, it is critical to keep records of expenses in order to justify them and to show that you are not gifting the money in an improper or ineligible manner. Document everything just to be on the safe side.

You should also develop a strategy to help you spend down your funds with the greatest possible long-term ROI for your family. Buying a home or paying off a mortgage is an excellent step for those who have substantial assets to work with – as is investing in home improvements, repairs, upgrades, etc. These are investment that will help grow the value of the home over time.

Additionally, investing in pre-paid burial assets allows you to spend money now that will save your loved ones from making painful, and sometimes expensive, decisions later. Purchasing a vehicle gives you the option of buying an automobile that may have additional features, such as wheelchair lifts that will make it more convenient for you if you have mobility issues.

Life Settlements Can Help You Spend Down More Strategically

You understand the importance of saving money. You’ve probably experienced a lifetime of frugal living in order to enjoy some degree of comfort as you retire. Now you must take steps to get more value from your money as you spend your hard earned assets.

One prudent way to do this is with a life settlement. Since you can no longer have life insurance policies with values greater than $1,500, it is likely you will need to get rid of the policy you have.

Rather than allowing the policy to simply lapse, losing all benefits and value, consider a life settlement instead. This allows you to recover some of the money you’ve paid in year after year so you can get something out of those long years of faithfully paying those monthly premiums.

How Can a Life Settlement Help with Medicaid?

The great thing about life settlements is that they are somewhat flexible. One of the options available to you when creating a life settlement is the option to receive monthly payments instead of one lump sum payment.

If your settlement is set up so that it does not allow you the option to remove your funds as a lump sum payment then you will count that money as income rather than a countable asset. This means it does not have to become part of the spend down process.

The caveat is that there are strict rules and regulations about how spend downs can be conducted. That’s why it’s important to choose carefully which life settlement organization you do business with. Windsor Life Settlements, for instance, works with countless nursing homes and assisted living facilities in order to ensure that the life settlement process is conducted ethically and properly with the resident’s best interests in mind. Life settlements can be an important tool for spending down your assets, particularly when careful thought and planning is followed and it is used in combination with the other methods mentioned above.