The prospect of needing long-term care is a source of anxiety for many West Virginia families. The staggering cost of nursing homes or in-home assistance can deplete a lifetime of savings in a distressingly short period. For seniors also carrying significant debt—whether from credit cards, medical bills, or a mortgage—the situation feels even more precarious. It creates a powerful conflict: the need to qualify for Medicaid, the primary payer for long-term care, while also managing obligations to creditors who have a legal right to be paid. Many seniors feel trapped, fearing that any move to protect their home could jeopardize their care, or that paying a debt could make them ineligible for benefits.

How Does Medicaid View Debt When Calculating Eligibility?

A common point of confusion is how debt impacts the Medicaid application process. The direct answer is that it does not. Medicaid is a means-tested program that evaluates an applicant’s financial eligibility based on two primary factors:

• Income: The amount of money an individual receives on a monthly basis from sources like Social Security, pensions, or other payments.
• Assets: The value of things an individual owns, such as bank accounts, stocks, bonds, and real estate. These are often referred to as “countable” or “non-exempt” resources.

Notice that liabilities, or debts, are not part of this calculation. Medicaid will not subtract the $20,000 you owe on a credit card from the $30,000 you have in a savings account. For eligibility purposes, you simply have $30,000 in countable assets, which is well over West Virginia’s limit for an individual (typically around $2,000). This policy creates the central challenge for seniors with debt: you can have too many assets to qualify for Medicaid while simultaneously lacking the funds to both pay your creditors and cover your long-term care costs.

The Clash Between Creditor Rights and Long-Term Care Needs

While Medicaid may disregard your debts, your creditors do not. They have legal avenues to collect what they are owed, and these actions can directly interfere with your ability to plan for long-term care.

• Unsecured vs. Secured Debt: It is important to distinguish between the two main types of debt. Secured debt is tied to a specific piece of collateral, like a mortgage on a home or a loan on a car. If you fail to pay, the lender can foreclose on or repossess the property. Unsecured debt, such as credit card bills and medical expenses, has no collateral. To collect, an unsecured creditor must first sue you, win a judgment in court, and then use that judgment to place a lien on your property or garnish your bank account.
• The Family Home at Risk: For many seniors, their home is their most valuable asset. It is often a primary target for unsecured creditors who have obtained a judgment lien. At the same time, the home is a central piece of Medicaid planning. While your primary residence is typically an exempt asset during your lifetime (up to a certain equity value), it can be subject to Medicaid Estate Recovery after you pass away. This means the state can seek reimbursement from your estate for the cost of care provided. Consequently, your home can be caught in a tug-of-war between creditors and the state.

How Does West Virginia’s Five-Year Look-Back Period Affect Debt Repayment?

To prevent applicants from simply giving away their assets to qualify for benefits, Medicaid implements a five-year “look-back” period. This means the state will review all financial transactions made in the five years preceding your application. Any asset transferred for less than its fair market value is considered a gift, which can result in a penalty period during which you are ineligible for Medicaid benefits.

So, how does paying off debt fit into this?

Paying a legitimate, legally enforceable debt is not a gift. It is a transfer for fair market value—you are satisfying a legal obligation. Therefore, using your assets to pay off a credit card balance, a car loan, or a mortgage is generally permissible and will not trigger a Medicaid penalty.

However, the situation becomes more complicated if the transfer could be viewed as a “fraudulent conveyance.” This legal concept applies when a person transfers an asset with the intent to hinder, delay, or defraud a creditor. If you, for example, give your home to your child to shield it from creditors shortly before applying for Medicaid, the transaction could be challenged by both creditors and the state. This action would almost certainly result in a Medicaid penalty. The timing, intent, and nature of any transaction are heavily scrutinized.

What Are Effective Strategies for Managing Debt Before a Medicaid Application?

Balancing debt repayment with the need to qualify for Medicaid requires a careful and ordered approach. The goal is to legally reduce your countable assets while satisfying your obligations in a way that is compliant with Medicaid rules.

Here are several strategies that may be considered:

• Paying Debts with Countable Assets: The most straightforward strategy is to use countable assets (like cash in a savings account) to pay off or pay down legitimate debts. This simultaneously resolves a liability and reduces your assets to help you meet Medicaid’s strict limit. For example, taking $15,000 from a savings account to pay off a high-interest credit card bill is a valid spend-down tactic.
• Paying Down a Mortgage: Since a primary residence is often an exempt asset, using countable funds to pay down the mortgage can be an effective planning tool. This converts a countable asset (cash) into additional equity in a non-countable asset (the home).
• Considering Bankruptcy: In some situations, filing for bankruptcy may be a viable option. A Chapter 7 bankruptcy can eliminate unsecured debts like credit card balances and medical bills, simplifying your financial situation significantly. If pursued well in advance of a Medicaid application, it can wipe the slate clean of certain liabilities, making the subsequent Medicaid planning process more manageable. This is a major legal step and requires a thorough analysis of your assets, as some property may need to be liquidated by the bankruptcy trustee.
• Negotiating with Creditors: It may be possible to negotiate with unsecured creditors to settle a debt for less than the full amount owed. A successful negotiation reduces your total liability and allows you to resolve the debt for a lump sum, which further helps in spending down countable assets.

Can a Trust Protect My Assets from Both Creditors and Medicaid?

A Medicaid Asset Protection Trust (MAPT) is a sophisticated legal tool used in long-term planning. It is an irrevocable trust that you create and fund with your assets. After the five-year look-back period has passed, the assets held within the MAPT are no longer considered countable for Medicaid eligibility purposes.

But does a MAPT also protect those assets from your creditors? The answer depends heavily on timing and intent.

If you establish and fund a MAPT long before you incur debt or need long-term care, the assets inside it are generally protected from future creditors. The trust owns the assets, not you. However, if you transfer assets into a trust to specifically avoid paying existing creditors, the transaction may be classified as a fraudulent conveyance. West Virginia law allows creditors to challenge such transfers and potentially “undo” them to access the assets. For this reason, proactive planning is key. A MAPT is most effective as a shield against future, unforeseen liabilities, not as a tool to evade current ones.

Protecting the Healthy Spouse When Debt Is a Factor

Medicaid includes provisions to prevent the impoverishment of the healthy spouse still living at home, often called the “community spouse.” In West Virginia, the community spouse is entitled to keep a certain amount of the couple’s combined assets, known as the Community Spouse Resource Allowance (CSRA), as well as a portion of the institutionalized spouse’s income in some cases.

When a couple has joint debt, these rules become even more important. The assets protected under the CSRA can be used to pay off joint mortgages, car loans, or credit cards without affecting the institutionalized spouse’s Medicaid eligibility. This allows the community spouse to secure their own financial footing while ensuring their loved one gets the care they need.

A Strategic Approach to a Secure Future

Navigating the dual pressures of significant debt and the need for long-term care requires more than a simple will or a single action. It demands a comprehensive strategy that is tailored to your unique financial situation, the type of debt you have, and your family’s goals. For West Virginia families facing this challenge, the key is to be proactive. The more time you have to plan, the more options are available to protect your assets, manage your liabilities, and ensure a stable future for yourself and your loved ones. An informed approach can provide peace of mind and a clear path forward.

If you are a senior or have a family member in West Virginia struggling with these issues, it is important to seek guidance. Contact Hewitt Law PLLC today to schedule a consultation. Our team is dedicated to helping West Virginians develop sound legal strategies that protect their hard-earned assets while providing for their future well-being.