Divestment Strategies and Long Term Care

Preserving assets through divestment is a poorly understood area of law.  Often we are asked about how the annual gift tax exclusion (currently $13,000) relates to long term care planning.  In short, it really doesn’t.  The annual gift tax exclusion does not reduce the Medicaid penalty period for asset transfers that occurred within five years of receiving long term care benefits.  In Wisconsin, nearly any transfer of income, non-exempt assets, and homestead property for less than fair market value is considered a divestment.  However, there are strategies available for preserving the maximum amount of assets and incurring the minimum penalty.