The Half-a-Loaf Strategy: A Smart Way to Preserve Assets During Medicaid Planning

When a loved one is facing the high costs of long-term care, families often ask: Is there any way to preserve part of our savings for the next generation?

The answer—sometimes—is yes. One time-tested method that elder law attorneys use is called the Half-a-Loaf Strategy. Though the name might sound unusual, this approach combines two powerful tools—gifting and annuities—to help families shelter a portion of their assets while still qualifying for Medicaid.

Let’s break it down.

What Is the Half-a-Loaf Strategy?

The Half-a-Loaf Strategy is a Medicaid planning technique that allows an individual to:

✅ Gift part of their assets to their children (or other beneficiaries), and ✅ Use the remaining funds to purchase an immediate annuity, which then pays for the cost of care during a Medicaid penalty period.

The concept hinges on the fact that Medicaid penalizes gifts—but if you plan carefully, you can offset that penalty with an income stream from an annuity. The strategy lets you effectively protect about half of the assets, hence the name: you keep half, you give up half.

How It Works (In Simple Terms)

Let’s say Mom has $100,000 in countable assets, but she’s about to enter a nursing home and wants to preserve some of her money for her children.

Under the Half-a-Loaf strategy:

1. Gift approximately $50,000 to her children. This triggers a Medicaid penalty period—a temporary ineligibility for benefits due to the uncompensated transfer.

2. Use the remaining $50,000 to purchase a Medicaid-compliant annuity. This annuity:

   • Pays out monthly income during the penalty period,

   • Covers nursing home expenses while Medicaid is temporarily unavailable, and

   • Ends just as the penalty period concludes, at which point Medicaid eligibility is restored.

   
   

In the end, the family was able to legally preserve about 50% of the assets for inheritance purposes.

Why It’s Complicated (And Powerful)

This strategy requires:

• Careful legal timing to ensure the penalty period and annuity payout durations align precisely,

• A very specific type of annuity that meets Medicaid requirements (few companies offer them),

• State-specific compliance, especially in Texas, where annuity rules and Medicaid eligibility requirements are particularly strict.
  

⚠️ Do not attempt this strategy without an elder law attorney. One small misstep can disqualify you from Medicaid or result in significant financial losses.

When Does the Half-a-Loaf Strategy Make Sense?

This approach can be effective when:

• A loved one is about to enter long-term care and has significant savings above the Medicaid asset limit,

• The family wants to pass some wealth to children, and

• There’s enough planning time to coordinate the gifting and annuity payout schedule properly.
  

It’s especially useful in situations where:

• Immediate full Medicaid eligibility isn’t possible, but

• Some assets can still be preserved rather than spent entirely on nursing home care.

Final Thoughts: A Loaf Saved Is a Legacy Preserved

In Medicaid planning, sometimes you can’t keep the whole loaf—but with the Half-a-Loaf Strategy, you may not have to give it all away either.

This method is complex but incredibly effective when handled correctly. It’s a great example of how strategic legal planning can make a real difference in preserving a family’s legacy.

📞 Want to learn if this strategy is right for you? Contact Willingham Law Firm, P.C. today to schedule a Medicaid planning consultation. We'll walk you through your options and help you determine whether a Half