It seems like a simple answer. And some have the opinion that the answer is unfair; that it is unfair to plan for Medicaid. It is an interesting statement. You do not hear such a statement concerning rich people taking advantage of every tax break that the Internal Revenue Code offers them. Yet, when people utilize the opportunities that Medicaid planning can afford them, some people sneer and feel it is unfair.
The Medicaid laws are designed so as to afford those in need coverage of Medicaid. The laws and regulations also have been modified to allow the spouse not in the nursing home (the community spouse) some planning so as not to be impoverished just so that his/her spouse is in the nursing home Planning techniques for single individual are available also.
Treatment of Assets
To understand how to qualify for Medicaid, you first need to know how Medicaid treats your assets. Basically, Medicaid breaks your assets down into two separate categories. The first category includes assets which are exempt. The second category includes assets which are non-exempt or countable.
Exempt assets are those which Medicaid will not take into account (at least for the time being). Generally the following assets are exempt in Kansas:
- The home [provided your equity does not exceed $552,000 or up to $828,000 depending upon the state in which you live]. The home must be the principal place of residence. The nursing home resident may be required to show some “intent to return home,” even if this never actually takes place.
- Household and personal belongings, such as furniture, appliances, jewelry and clothing.
- One vehicle.
- Prepaid funeral plans and burial plots [with a maximum limit set by your state].
- Cash value of life insurance policies, as long as the cash value of all policies added together does not exceed $1,500. If the total value does exceed $1,500 in total cash value, then the cash value in these policies is countable. Term life insurance is exempt because it does not build cash value.
- Cash (e.g. a small checking or savings account) not to exceed $2,000 [or higher depending upon the state in which you live].
- IRA and pension plan of the community spouse [see your states specific rules].
All other assets which are not exempt (i.e. the ones not listed earlier) are countable. This includes checking accounts, savings accounts, certificates of deposit, money market accounts, stocks, mutual funds, bonds, IRA’s, pensions, etc. While there are some minor exceptions to these rules [e.g. in Pennsylvania the IRA or other retirement plan of the community spouse may be exempt], for the most part, all money and property, as well as any item that can be valued and turned into cash is a countable asset, unless it is one of those listed earlier as exempt.
While the Medicaid rules themselves are complicated and somewhat tricky, for a single person it’s safe to say that you may qualify for Medicaid so long as you have only exempt assets plus a small amount of cash.
For a married couple the community spouse (i.e. the one not needing nursing home care) can generally keep one-half of the assets up to a maximum of approximately $119,220.
The Planning Process
The planning process may take many forms.
- Division of Assets
care paid for by Medicaid. The right to division of assets recognizes that it makes little sense to impoverish both spouses when only one needs to qualify for Medicaid assistance for nursing home care.
Basically up to one-half of the assets are assigned to the community spouse, not to exceed $119,220. After the assets are divided, the spouse in the nursing home must spend down his/her assets to $2000 [depending upon your state], in order to be eligible for Medicaid.
Appropriate spending allows for the purchases of such things as prepaid funeral plans, improvement to the family home, purchasing or upgrading a family car, prepaying taxes, pay off family debt and the like. By proper utilization of the division of assets, the community spouse can be made relatively debt free.
- Conversion of Assets into Income
- Conversion of Assets into Exempt Assets
Though some families do spend virtually all of their savings on nursing home care, Medicaid often does not require it. There are a number of strategies which can be used to protect family financial security.
Medicaid law is complex and there is a great deal of confusion over the “division of assets” and the “Medicaid spend-down.” Everyone’s situation is different.
Aging persons and their family members face many unique legal issues. As you can tell from our discussion of the Medicaid program, the legal, financial, and care planning issues facing the prospective nursing home resident and family can be particularly complex. If you or a family member needs nursing home care, it is clear that you need expert legal help. Where can you turn for that help? It is difficult for the consumer to be able to identify lawyers who have the training and experience required to provide expert guidance during this most difficult time.
If you have questions regarding how to pay for Long Term Care, asset protection and qualifying for Medicaid and you live in Pennsylvania, New Jersey Delaware or Maryland contact our experts at 855.471.6771 or firstname.lastname@example.org Thank you