Resources
Chambliss Estate Planning Newsletter – September 2025
Medicaid Planning in Tennessee: Why Early Action is Critical
Protecting tour assets while ensuring access to essential long-term care coverage.
The statistics are sobering — more than 70% of Americans over age 65 will need some form of long-term care during their lifetime, with costs in Tennessee averaging $8,580 per month for nursing home care and climbing annually. For most families, these expenses quickly exhaust life savings, making Medicaid eligibility essential for accessing quality care while preserving some family wealth.
However, qualifying for Medicaid requires navigating complex federal and state regulations that can trap the unprepared. In Tennessee, proper Medicaid planning must begin years before care is needed, making early consultation with experienced counsel absolutely critical.
Understanding Tennessee’s Medicaid Landscape
Tennessee administers its Medicaid program through TennCare, which provides long-term care coverage for individuals who meet strict financial eligibility requirements. For 2025, single individuals must have countable assets below $2,000 and a monthly income under $2,901 to qualify for nursing home coverage.
These limits may seem straightforward, but Tennessee’s Medicaid rules contain numerous complexities regarding what assets count toward the limit, how income is calculated, and what planning strategies remain available. More importantly, Medicaid’s five-year “look-back” period means that any asset transfers made within five years of applying for benefits trigger potential penalties that can delay coverage when it’s most needed.
The Five-Year Look-Back: Why Time Matters
Tennessee Medicaid examines all financial transactions for the five years preceding any application for long-term care benefits. Transfers made for less than fair market value during this period can result in penalty periods during which the applicant is ineligible for coverage. The family would be responsible for nursing home costs during that time, regardless of their current financial situation.
This creates a critical planning window: legitimate Medicaid planning strategies must be implemented well before care becomes necessary, ideally when individuals are healthy and independent. Waiting until a health crisis occurs often eliminates most planning options and forces families to spend down assets with little strategic benefit.
Common Planning Mistakes That Create Problems
Informal gifting represents the most frequent error in pre-Medicaid planning. Well-meaning families often transfer assets to children or grandchildren without understanding the penalty implications. Even seemingly innocent gifts, such as paying for grandchildren’s education, helping with home purchases, or annual holiday gifts, can create Medicaid penalties if not properly structured.
Improper asset titling can also create complications. Adding children’s names to bank accounts or real estate deeds may seem like simple planning, but these changes can affect Medicaid eligibility calculations and create unintended gift tax consequences.
Delayed planning remains the costliest mistake. Families who wait until long-term care needs are imminent, often find their options severely limited, forcing them to accept asset losses that proper advance planning could have prevented.
Tennessee-Specific Considerations
Tennessee’s Medicaid program includes several state-specific features that affect planning strategies:
- Estate Recovery: Tennessee aggressively pursues estate recovery, seeking reimbursement from deceased Medicaid recipients’ estates for benefits paid. This can affect overall estate planning goals.
- Spousal Protection: Tennessee provides certain protections for community spouses (non-applicant spouses), allowing them to retain their home, one vehicle, and approximately $157,920 in countable assets (2025 limits). However, proper planning can often increase these protections significantly.
- Home Ownership: The family home is generally exempt while occupied by the Medicaid applicant or their spouse, but becomes subject to estate recovery after death. Strategic planning can often provide better protection for this valuable asset.
- Retirement Accounts: Retirement accounts are considered a countable resource in Tennessee, which differs from other states depending on the structure of the payments made out of the account.
Legitimate Planning Strategies
When implemented with sufficient advance notice, several strategies can help Tennessee families preserve assets while maintaining Medicaid eligibility:
- Irrevocable Trust Planning: Properly structured irrevocable trusts can remove assets from Medicaid consideration while providing some continued benefit to the family. These trusts require careful drafting to comply with Tennessee law and federal Medicaid requirements. There is a five-year look-back on the funding of these trusts, so early planning is essential.
- Asset Conversion: Converting countable assets to exempt assets (such as home improvements, certain annuities, or funeral planning) can reduce countable resources without triggering penalties.
- Strategic Timing: Coordinating asset transfers, income planning, and care decisions can maximize the effectiveness of available strategies while minimizing penalty exposure.
- Caregiver Agreements: Formal agreements compensating family members for caregiving services can provide legitimate asset transfer opportunities while supporting aging in place.
Why Professional Guidance is Essential
Medicaid planning involves complex regulations that change frequently and interact with federal tax law, state property law, and family dynamics in ways that require specialized experience. Regulations can change twice or more per year, necessitating help from professionals to navigate the ever-changing legal landscape. The penalties for mistakes can be severe, potentially leaving families without coverage when they need it most.
Moreover, effective Medicaid planning must be customized to each family’s specific circumstances, assets, and goals. Cookie-cutter approaches often fail to maximize protection or may create unintended consequences that defeat the planning objectives. Medicaid planning cannot occur in isolation from overall estate planning goals. Strategies that protect assets for Medicaid purposes may conflict with tax planning, family dynamics, or charitable intentions.
The Urgency of Early Planning
The most important aspect of Medicaid planning is timing. Effective strategies require years to implement safely, and waiting until care is needed often eliminates most options. Families who begin planning while parents are healthy and independent have significantly more opportunities to preserve wealth while ensuring access to quality care.
Medicaid planning is not about gaming the system; it’s about making informed decisions within the legal framework to ensure families can access necessary care without complete financial devastation. However, the window for effective planning closes as health declines and care needs become imminent.
Tennessee families should begin Medicaid planning conversations early, while options remain available and implementation timelines allow for proper strategy development. The cost of early planning is invariably less than the cost of crisis planning or, worse, the loss of assets that proper advance planning could have protected.
If you believe Medicaid planning may be necessary for your family’s future, don’t wait until crisis strikes. Our office provides comprehensive Medicaid planning services tailored to Tennessee’s specific requirements and each family’s unique circumstances. Contact Abby Sutton, Rebecca Miller, Sally Brewer, Amy Boulware, Dub Ellis or another member of our estate planning team today to discuss your situation and explore strategies to protect your family’s financial security while ensuring access to quality long-term care.
Estate Planning Resources
Why Aren’t More Older Adults Thinking About Long-Term Care?
After decades of handling our daily personal care needs without giving them a second thought, it is hard to imagine needing help with these tasks. However, research shows that about one in seven adults aged 65 or older will need help with daily care. Help with daily personal care is referred to as long-term care and too many adults assume they won’t need it…
ABLE Accounts: Big Changes Coming in 2025-2027
For the tens of millions of Americans living with a disability, financial hardship often accompanies the physical and emotional challenges they can face on the path to full participation in society…
Older Adults Struggle to Meet the Dual Burden of Housing and Care
After many years of handling daily tasks, such as bathing, dressing, and cooking, we tend to take for granted that we can do these tasks without help. However, as we age, many of us will need help with some of these tasks, as well as other daily activities. In fact, nearly 70 percent of people age 65 and older will develop difficulty performing certain daily tasks, requiring some form of long-term care support in their remaining years…
Upcoming Events
YMCA Adaptive Programs
Where: YMCA of Metropolitan Chattanooga
The YMCA of Metropolitan Chattanooga offers a wide variety of adaptive programs for individuals of all ages, including adaptive group exercise classes, swim lessons, sports clinics, and more! To learn more, visit the YMCA website.
GCA Centre for Adult Autism In-Person Social Support Group
Where: Chattanooga Pizza Co. (2000 E 23rd Street) | When: March 25, 2025
Meet with like-minded individuals at the GCA Centre for Adult Autism’s monthly in-person support group. The group will meet from 6-7:30 p.m. If you have any questions, please email Jamie Mackintosh at jamie@chattanoogaautismcenter.org.
Autistic Women Support Group
Where: Chattanooga Autism Center (1400 McCallie Avenue) I When: October 3, 2025
Gather in a supportive environment with a group of autistic women to share experiences and resources. The group will meet from 6:30-8 p.m. To learn more, visit the CAC website.
Also Check Out…
Exclusive: AARP-NAC Report Finds 45% Increase in Americans Providing Care
The number of caregivers in the U.S. has increased significantly over the past decade. Caregivers are taking on more responsibilities, which is having a negative impact on their physical and financial well-being. Millennials and Gen Z are increasingly part of the “sandwich generation,” juggling care for young children and aging parents. As baby boomers reach their 80s, the demand for long-term care is rising. Many caregivers provide support for serious medical conditions over extended periods and make significant personal sacrifices for their loved ones.
Article Title Trumps Administration Poised to Cut SSI Benefits for Nearly 400,000 Low-Income Disabled and Older People
The Trump Administration is planning to propose a rule that could reduce benefits or lead to the loss of eligibility for low-income recipients of Supplemental Security Income (SSI), including disabled individuals and older adults. The reporting requirements may change significantly, necessitating more frequent submissions of reports.
