Strategies To Become Medicaid Eligibility While Preserving Assets
When a married couple has assets over the allowable amount, there are several strategies that can be used to lower the amount of countable assets. In turn, this allows an applicant spouse to become eligible for Medicaid. At the same time, these strategies may help families to lower debt or preserve their assets.
Pay Existing Bills Assets can be used to pay existing debt. For instance, one may pay off a mortgage, credit card bills, outstanding medical bills, or pay off a car loan. Medicaid does not penalize applicants for these financial transactions.
Make Home Improvements or Home Modifications Assets can be spent on improving ones home, such as replacing a leaky roof and updating heating and plumbing systems. In addition, assets can be used toward making home modifications, such as widening doorways for wheelchair access, replacing regular bathroom sinks with pedestal sinks, and installing a roll-in shower.
Create a Funeral Trust Certain irrevocable funeral trusts created for the Medicaid candidate and / or their spouse can enable a couple to reduce their countable assets by up to $30,000 . Doing so helps to qualify a person for Medicaid while taking care of an inevitable expense that will eventually come out of the familys resources. Be aware that not all funeral trusts are exempt and creating the trust can be complicated. Learn more.
What Happens If I Or My Spouse Sells The Homestead
If you or your spouse sell your homestead then your home no longer remains an exempt asset for Florida Medicaid qualification purposes. The exception to this is if you purchase another homestead within three months after the sale of your homestead. If your homestead is being replaced due to loss or damage, then the time limit to replace the homestead is extended to nine months.
Joe decides to sell his houseboat since he is worried about his family not being able to adequately take care of the houseboat while hes in a nursing home. He uses the proceeds from the sale to purchase a small home within two months of the sale of the houseboat. Because Joe replaced his homestead property with another homestead, the new home is completely exempt for Florida Medicaid qualification purposes.
Joe could run into an issue in the example above if he purchases a new homestead but does not spend any time living in the homestead.
If you sell your homestead before applying for Florida Medicaid, you will have three months starting on the date the Florida Medicaid application is sent in to replace the homestead.
Make sure to use all of the proceeds you receive from the first sale. If you have proceeds left over after replacing the homestead, these proceeds will be countable assets for Florida Medicaid qualification purposes.
Are There Medicaid Exemptions For Transfers Of Assets
Under Medicaid, any transfer of assets within the past five years may trigger a Medicaid penalty. However, for most rules, there are also exceptions. Medicaid allows transfers in certain circumstances. If a transfer meets one of these exceptions, the transfer would not affect the Medicaid eligibility of the applicant.
Can I Transfer My Homestead To Someone Else While In A Nursing Home
Transferring the homestead should only be done in certain circumstances and should be done with extreme caution. If the homestead is not transferred properly the homestead could be considered a non-exempt asset and may have to be spent down.
Florida Medicaid allows transfers of homestead in the following circumstances:
- Legal spouse
- A blind or permanently disabled child
- A sibling who has equity interest in the home
- Adult son or daughter
When the homestead is transferred to a sibling who has an equity interest in the home, the transfer is only valid if the sibling both had an equity interest in the home and lived in the home for at least one year prior to the Medicaid applicant going to the nursing home.
Similar to transferring homestead to a sibling, homestead can be transferred to an adult child if the child was residing in the home for at least two years prior to the Medicaid applicant going to the nursing home.
How When & Why To Protect A Familys Financial Assets When Applying For Medicaid Long Term Care
SummaryIt is a common misperception that a family or couple must give up or spend down all their financial assets in order for a loved one to qualify for Medicaid Long Term Care. This is not the case. Not only does Medicaid offer certain protections to prevent spousal impoverishment, but there are also proactive steps a family can take to preserve much of their financial assets.
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Asset Limits For 2019
In order for a senior to qualify for long-term Medicaid, the applicant must not have assets over a certain amount. This figure may change annually and differs in some states. In 2019, in most states, this amount is restricted to $2,000. Some states allow an applicant to have a higher amount of assets, but in no state does that amount exceed $15,450, which is New Yorks limit.
The Community Spouse Resource Allowance also varies based on the state. As of 2019, the minimum resource amount a state may allow is $25,284, while the maximum resource amount a state may allow is $126,420.
A further complication is that there are two different ways in which states can calculate the CSRA There are 50% and 100% states. In the states known as 50% states, the community spouse is able to keep up to 50% of the resources, up to the maximum allowable amount. That said, 50% states do have a minimum resource allowance. And if the non-applicant spouses share falls under this minimum amount, he or she is allowed to keep 100% of the assets, up to the minimum resource allowance amount. In many states, as of 2019, this amount is $25,284. In 100% states, the community spouse is able to keep 100% of the resources, again, up to the allowable amount. In many states, as of 2019, this amount is $126,420.
|2019 Medicaid Community Spouse Resource Allowance|
|Couples Combined Assets|
How Does Medicaid Work
If you want to access Medicaid benefits, including long-term care waivers, the first step is to apply for coverage. You can complete this process through the Healthcare Marketplace or your states Medicaid agency. Applications are typically processed by the Department of Human Services or a similar division.
To qualify for Medicaid, you must meet certain financial and medical eligibility requirements. There are income and asset limits, and for some benefits, applicants must require a nursing facility level of care , as determined by a functional needs assessment that rates your health and ability to perform everyday tasks.
Since Medicaid is for individuals who have limited resources and/or extensive medical needs, there are no premiums or deductibles in most cases. However, some states have share-of-cost requirements that are typically based on your income. Once your coverage is in place, youll have access to primary and emergency medical care, as well as long-term services and supports. In some states, Medicaid is administered by the government, and other states have managed care organizations that are operated by private insurers. This type of coverage gives you access to Health Maintenance Organization or Preferred Provider Organization networks that will be familiar if youve had other types of insurance.
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Exempt And Countable Assets For Medicaid
To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt assets.
Generally exempt assets for purposes of North Carolina Medicaid in a nursing home, consists of:
- The residence, if the community spouse is living there, or if the applicant/recipient has an intent to return home. Note that this can be stated as an intent to return, even if the person can no longer make decisions
- One essential vehicle, provided that the applicant/recipient can ride in it.
- Pre-need burial contracts that are irrevocable.
- Life insurance policies that have no more than $10,000 of initial face value. If the policy has increased in death benefit that is not countable if the original face value was $10,000 or less. However, participating policies that have dividend accounts are countable to the extent of the dividend account. Term policies and group policies are not countable assets. As you can see, this is a tricky area.
- Personal furnishings
- Business property provided that the Medicaid applicant or spouse actively participates in the business.
- Jointly owned real estate, if co-owned with someone other than the spouse.
Pretty much everything else is countable for Medicaid. In some states, IRAs are non-countable. However, in North Carolina IRAs are considered countable assets.
What Assets Are Exempt From Medicaid
Medicaid insurance does not require all of its recipients tobe completely drained since certain assets will be exempted. When a person appliesfor Medicaid insurance, it will research and decide what will be there incountable assets, and the countable assets will be all things except for theexempt assets. This implies that Medicaid insurance will not count some assets inits checklist to see if the Medicaid applicant qualifies. The following is alist of exempted resources in assessing a Medicaid applicants eligibility forMedicaid nursing home services:
1. Homestead residence. The applicants principal place of living is anexcluded resource until they wish to return home. It is not required for the Medicaid insurance applicantto prove the wish to return home. If the applicant had not lived in the housewhile owning an ownership interest in the property, then it cannot be exempted.But if the house is a property that is bought inside three months following themonth of sale of the original home, then it can be exempted.
3. Automobile. Oneautomobile for the person, regardless of its value, is excluded.
4. Household goods and personal effects. Items of regular house usage like furniture,appliances or personal importance materials like clothing are excluded.
8. Fixed funeral plan. If the Medicaid or the spouse applicant has anirreversible prepaid funeral plan, then it is exempted irrespective of itsvalue.
Rules for Spouses:
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What Assets Can You Keep On Medicaid
In addition to Medicaids income restrictions and non-financial requirements, applicants must also meet specific asset limitations. In fact, the asset qualification is typically the hardest for applicants to meet. Fortunately, not all of your assets are countable for Medicaid purposes. You can keep certain exempt assets while still qualifying for Medicaid.
Taking Advantage Of Magi
The Affordable Care Act simplified Medicare eligibility and enrollment for millions of Americans. Using MAGI for eligibility simplified the application process. The administrative burden of confirming assets was put to the wayside. Unfortunately, it also gave wealthy people the opportunity to take advantage of taxpayer dollars.
This loophole occurs because the majority of Americans now qualify for Medicaid through MAGI, which unless you are seeking long-term nursing home care no longer uses the asset test. People who are asset rich, particularly those who have investments or real estate properties, can still technically meet MAGI criteria.
Someone could own a home worth $850,000, a Lamborghini, a second vehicle, hundreds of acres of farmland, and still technically be eligible for Medicaid.
These Americans would be considered wealthy by any standards but by sheltering their net worth under the current tax laws, they would be legally eligible for Medicaid or subsidized plans through the Health Insurance Marketplace. This is the case even when they could easily dip into their assets to pay for health insurance.
If the intent is to provide health care to the most financially needy, MAGI Medicaid may need to consider how it addresses this loophole. The GOP is currently looking to repeal Obamacare which would, in effect, put an end to MAGI Medicaid altogether.
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Household Goods And Personal Effects
Household goods such as furnishings and equipment commonly found in a household are excluded. So are personal effects, including clothing, jewelry, items of personal care, recreational equipment, musical instruments, and hobby items. Items required because of a persons physical condition, such as prosthetic devices, dialysis machines, motorized wheelchairs, hospital beds, and similar items are excluded.
Medicaid Asset Rules In South Carolina
The general Medicaid eligibility rule is that a person cant have more than $2,000 in countable assets. If you are trying to become eligible for Medicaid to pay long-term care costs, you may need to spend down your assets or use other strategies to qualify.
Fortunately, some assets may not be counted for Medicaid purposes. The spouse of a nursing home resident is permitted a higher allowance of assets, and other assets are exempt.
Some personal possessions, one vehicle, and the primary residence may be exempt from the Medicaid asset calculation. However, there are some complex rules that apply, so ask your elder law attorney exactly how these will apply to your case.
If you have countable assets that exceed the $2,000 threshold, you may think that you could just gift them to your kids, but Medicaid has rules about transfers that include severe penalties.
Five-Year Penalty Period
Starting the day you apply to Medicaid, there is a five-year look-back period on any asset transfers you make. If you give away assets and dont receive fair value, you will be penalized.
The penalty is calculated based on the value of the transferred assets and leads to a ban for a certain period of time. If you transfer valuable assets, you could be ineligible for Medicaid for several months or even years.
Income and Estate Recovery
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Exempt Assets And Countable Assets: What Must Be Spent
To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt assets. Exempt assets are those which Medicaid will not take into account . In general, the following are the primary exempt assets:
- Home, no matter what its value. The home must be the principal place of residence. Estate Recovery can place a lien against the home for the amount of Medicaid benefits paid after six months of inpatient care at a nursing home.
- Personal belongings and household goods.
- One car or truck.
- Burial spaces and certain related items for applicant and spouse.
- Up to $1,500 designated as a burial fund for applicant and spouse.
- Irrevocable prepaid funeral contract up to $5,000 each for applicant and spouse.
- Value of life insurance if face value is totals $1,500 or less. If the face value does exceed $1,500, then the cash value in these policies is countable.
All other assets are generally non-exempt, and are countable. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt. This includes:
House May Be Exempt From Medicaid
I wrote an article that explains, in detail, what factors determine If the house is counted for Medicaid: if within equity limits and Medicaid applicant has âintent to return home,â the house is exempt.
If married: If spouse continues to reside in the house, it is exempt, regardless of value and not subject to. This also applies if there is a minor child or special needschild living at home.
Adult Child Care-giving Exception. If adult child has lived in the home for two years prior to the parentâs admission to the nursing home, then parent can convey house to child for nominal value and it will be deemed a compensated transfer . Read more about the Medicaid Sibling Exception. If sibling co-owns home and resides there for one year prior to the Medicaid Recipientâs admission to a nursing home. Institutionalized sibling can convey their portion of home to well sibling and it will be deemed a compensated transfer .
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Why Do Seniors Need To Plan For Medicaid Eligibility
You may not think you will ever need to qualify to receive Medicaid benefits because it is not something you have ever needed before. But nearly 70% of all seniors who are nearing the age of retirement will need some sort of long-term care at some point in the future. And unless you have pre-planned for these costs through a private long-term care insurance policy, you will also likely need help paying the excessively high costs for this long-term care. Unfortunately, Medicare and other private health insurance plans do not provide coverage for most long-term care costs. However, Medicaid does provide coverage which will help cover these long-term care costs. In fact, more than half of all residents currently receiving long-term care are reliant on Medicaid to help cover the costs of their care. This is why it is so important for todays seniors to prepare for Medicaid eligibility even if you do not need the coverage right now. With proper proactive Medicaid planning, you can ensure your assets are structured in a way which will preserve your assets while still allowing you to qualify for Medicaid benefits when you need them.
Medicaid Asset Limitations In Texas
These are assets that are counted toward the asset limit. They include bank accounts, vacation houses or properties that are not primary residences, stocks, bonds, mutual funds, and more. The countable asset limit for Medicaid applicants that are 65 years is a specified amount.
But many states provide wiggle room that allows for a limit that is significantly higher than the specified amount. For example, some states have a much higher resource limit for seniors that are disabled. Some states are working on phasing out asset limits altogether for people who are 65 years old or older.
For instance the asset limit in California is higher for people with a disability who are 65 years or older and is planning to phase out the asset test by 2024. Each state has a different asset limit for married couples and a trusted lawyer can give you more detailed answers regarding the amounts.
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