Spring is finally here! Even though farming is a year-round job, spring is an exciting time for farmers as they are busy planting seeds for a successful crop this year.

The family farm is both a home and a business. Often the farm was passed down to the farmer from their parents, and the expectation is to do the same for their children.

How can I protect the family farm for my children and still qualify for Medicaid?

As we all know, life expectancies are increasing, and with that so does the need for long-term care. The question then, for the farmer, becomes, ‘How can I protect the family farm for my children and still qualify for Medicaid?’

A farmer’s retirement income is often not enough to cover the cost of long-term care, but with assets like a farm, machinery, and livestock, or even rental income from the farm, the farmer may be over the Medicaid asset limit and not qualify for benefits. One option is to sell the farm to pay for long-term care, but most farmers will tell you that is not an option. They want to keep the farm and family business of operating the farm in the family. So, what options are there?

Medicaid, trusts, and the 5-year lookback rule

If you go online, you might read something stating that if you put the farm in a trust, it will make it exempt from Medicaid. Other websites may recommend you to transfer the farm to your children now to “hide” it from Medicaid. An experienced elder law attorney (someone who specializes in Medicaid planning) will of course tell you first not to trust everything you read on the internet. Just by putting a farm in a trust, you have not made it exempt from Medicaid. Medicaid does not treat all trusts the same way, and in some cases titling an asset to a trust does just the opposite and turns an exempt asset into a countable one. And, with the 5-year lookback rule for Medicaid, any transfers made within 5 years of needing Medicaid are considered gifts and will trigger penalty periods.

Medicaid liens and estate recovery

Something else property owners need to be aware of are Medicaid liens. Medicaid can put what is called a TEFRA lien on your assets to recoup their expenses after you are gone, and if you still own the farm when you die, it is open to estate recovery. Any assets going through probate, or through a last will and testament, are especially susceptible to Medicaid estate recovery.

All of this does not mean that it is impossible to pass your farm on to the next generation. With proper planning, an elder law attorney can guide you on ways to protect the family farm and qualify for Medicaid benefits to assist you with the cost of your care.