November 1st, 2025 |

• Estate Planning
• General

By Attorney Maxx Forti

Reading Time: 3 minutes

When people talk about “Medicaid planning,” they generally mean arranging finances so someone can qualify for Medicaid long-term care coverage without unnecessarily losing their home, savings, or the financial security of a spouse. Good planning can reduce stress, preserve more of a person’s lifetime wealth, and avoid costly mistakes such as triggering a divestment penalty or an unwanted probate claim. But Medicaid rules are technical, change regularly, and are different from simple estate planning—so an informed, cautious approach is essential.

How Wisconsin Medicaid Works

Wisconsin Medicaid covers institutional care (nursing homes) and home- and community-based long-term services through waivers such as Family Care and IRIS. To qualify for long-term care Medicaid, you must meet strict asset and income tests; spouses and dependent family members have special protections under “spousal impoverishment” rules, so one spouse isn’t left penniless when the other needs nursing-home care. These rules—and how the state counts assets and income—are set by federal law and by Wisconsin’s Department of Health Services (DHS).

Five Core Rules to Know

1. The 5-Year lookback – Wisconsin (like every state) investigates transfers of assets that occurred in the five years (60 months) before you apply. Gifts or sales below fair market value within that period can create a “divestment penalty”—a period during which Medicaid won’t pay for long-term care. The penalty length is calculated by dividing the value of the divested assets by Wisconsin’s average nursing-home daily rate.
2. Asset and Income Counting – Countable assets generally include bank accounts, investments, and some property; exempt assets often include the applicant’s primary residence (under certain conditions), one vehicle, and personal belongings. Income rules differ: some waiver programs are subject to income caps, and others treat income differently. Because these figures are updated periodically, always check the latest DHS Medicaid Eligibility Handbook or a local ADRC before assuming a dollar amount.
3. Spousal Impoverishment Protections – If one spouse needs long-term care, federal/state rules permit the “community spouse” to keep a portion of the couple’s assets and receive an income allowance so they aren’t impoverished by the institutionalized spouse’s care. The exact community spouse resource share and monthly minimum/maximum allowances are set by DHS and are updated periodically.
4. Estate Recovery – After a Medicaid recipient dies, Wisconsin’s Estate Recovery Program may seek repayment from the recipient’s estate for certain long-term care services paid by Medicaid. There are exceptions (for example, when a surviving spouse, a minor child, or a disabled child survives), but estate recovery is a real risk if your plan relies on passing assets through probate.
5. Improper Transfers and “Lookback” Strategies – Transfers to certain people may be exempt (spouse, disabled child, or a child who lived with and cared for the parent). Other moves—like gifting large sums to adult children shortly before applying—will usually trigger penalties. The rules for annuities, promissory notes, and trusts are complex and require careful drafting to count as exempt or allowable.

Common Planning Tools

1. Qualified Income Trusts / Miller Trusts – In states with an income cap for nursing-home (or waiver) eligibility, excess income can be deposited into a Qualified Income Trust (QIT) so the applicant meets the income limit. QITs are technical and must be drafted and administered correctly. They don’t protect principal—they simply make income eligible.
2. Irrevocable Medicaid Asset Protection Trusts (MAPTs) – When set up well in advance (preferably more than 5 years before applying), an irrevocable trust can shelter assets from Medicaid eligibility counts. But transfers into such trusts during the 5-year lookback will trigger penalties. Irrevocable trusts also remove control of assets—so they’re not right for everyone.
3. Annuities and Promissory Notes – Properly structured annuities and promissory notes can convert countable assets into exempt income streams—but federal rules require that certain annuities name the state as remainder beneficiary for estate recovery purposes and meet strict conditions. Improperly executed annuities are a frequent source of eligibility denials.
4. Gifting – Simple to understand but dangerous near application time: gifts within 60 months typically create penalties. Gifting because you “don’t want Medicaid to get it” is often a costly mistake.

Practical Steps You Can Take Now

1. Start Early – The earlier you plan, the more legitimate options you have. Transfers made more than 60 months before the application are not subject to the lookback.
2. Inventory Assets and Document Everything – The state will ask about transfers, trust funding, annuities, and bank activity during the lookback period. Good records matter.
3. Consult Experts – Talk to an experienced Wisconsin elder-law attorney or a certified Medicaid planner. Medicaid planning is legal and financial work at the intersection of federal rules and Wisconsin regulations—a one-page checklist rarely suffices. Use specialists who keep current with DHS handbook releases.
4. Contact your Local Aging & Disability Resource Center (ADRC) – ADRCs provide counseling and local guidance on applying for long-term care and benefits; DHS materials often reference ADRCs as a key resource.

Final Cautions

Medicaid planning is a powerful tool when used properly, but it’s also an area with traps for the unwary: incorrect trust language, poorly structured annuities, and last-minute transfers can cost months of eligibility or outright denial. Always pair planning with current DHS guidance and professional advice.