Medicaid Long Term Care Rules
To receive Medicaid for long term care, a recipient must have less than a certain amount of income and assets. An asset includes cash, certain life insurance policies, bonds, stocks, money market accounts, second homes, second cars, and anything else that could be potentially converted to cash. Certain assets can take applicants over the asset limit for Medicaid, requiring applicants to spend down until they meet the asset threshold.
The upper limit to countable assets for a Medicaid applicant is $2,000. This means that if the value of your total countable (or non-exempt) assets exceeds $2,000, you may not be eligible for Medicaid.
To alleviate this issue and receive Medicaid, there is a tactic called “spending down.” This tactic of spending down allows Medicaid applicants to spend from their income and assets until their assets reach an acceptable level and the applicant becomes eligible for Medicaid.
It should be noted, however, that some forms of spending down do not count toward your Medicaid eligibility. For example, if an applicant were to find out she was $1,000 above the Medicaid requirements and decided to give a $1,001 gift to a family member, she would not become immediately eligible for Medicaid. Asset transfers and gifting away money come with penalties, which can delay or fail an application.
Assets Exempt from Medicaid Spend Down
While applicants are required to have under a certain amount in terms of assets and income, it is important to note that not all assets are counted towards Medicaid eligibility. Some assets are considered exempt and possessing them does not prevent a person from receiving Medicaid.
One home, depending on value, may be exempt from the Medicaid asset calculations. This means owning a home will not require you to spend down. This is because merely having a place to shelter yourself does not equate to having enough money to pay for private long term care. Some homes, however, may become countable assets because their value exceeds a certain amount. Also, second homes are always considered a countable asset.
In many states, a house must be worth below $595,000 to be considered an exempt asset. This is not true for all states, however, so it pays off to check your state’s local guidelines. For example, in higher cost of living states, a residence can be considered exempt even if it is worth up to $800,000. To determine whether your house may be an exempt asset, you must check the requirements for your specific state.
Also, to keep the house exempt, the applicant must be residing in the property or intend to return to it if currently residing in a nursing home or other care institution. There are workarounds to this so if you have any questions at all about keeping a property exempt, give us a call today and we would be more than happy to help.
Life Insurance Policies
To prevent people from dropping their life insurance policies and leaving their family with no guarantee of financial stability upon their death, the government exempts life insurance policies as long as there is no cash value.
For policies with cash values, if the value of a universal, variable or permanent life insurance policy goes beyond an upper limit of $1,500, it will not be considered exempt.
One car may be considered an exempt asset when applying for Medicaid. Show cars, if their value is very high, may be an exception to this rule even if it is the only car owned. Second cars are counted as countable assets. The car in question must be used for the transportation of the applicant or for a member of the applicant’s family.
For those with other property that is essential to supporting them, there may be exemptions made available. An applicant’s equity interest in these properties is taken into account when deciding whether or not the properties will be considered exempt from requirements.
Examples of these sorts of properties include any properties from which the applicant derives an income. For example, if an applicant owns a rental property, that property may become exempt from income and asset requirements if their income is still below the Medicaid limit.
Another example of an exempt property might include a ranch, the products of which are sold to generate income for the applicant. Properties of this sort also include farms, which can be shown to have a real and obvious effect on the applicant’s ability to support him or herself.
Up to $6,000 of equity interest the applicant has in these properties can be made exempt from their assets. This only applies if the property is able to produce a certain portion of the monetary value of the equity interest. This portion is valued at 6% of the equity interest.
To help applicants provide for their future funeral costs, funeral and burial funds are considered exempt from Medicaid requirements. These funds are often limited to $15,000. Senior Planning can help you create a burial trust to protect assets.
Before going through the spend down period, consider whether or not some of your assets may be considered exempt according to Medicaid eligibility requirements. Give us a call and we can help determine how to save as much of your assets as possible, while still getting approved to Medicaid Long Term Care. Spending down can be a time consuming process and may not be necessary, so it pays off to know all your options.