An unmarried person must have less
then $2,000 in countable assets. They don’t count your home,
except to the extent its equity value exceeds $560,000, or
personal and household goods, or one vehicle of any value, and
certain other items.
A married couple can have
more—sometimes much more. There’s no limit to the value of an
exempt home of a married couple. In most cases a couple must
spend down half the countable assets they own. However, they may
be able to keep all they have if their incomes together total
less than about $3,000.
The limit on countable income is
$2,205 per month. However, that can always be avoided by running
your income through a trust called a Qualified Income Trust or
Miller Trust. If both spouses live in a nursing home on
Medicaid, the same exemptions as for unmarried people apply, and
the couple can have no more than $3,000 in total countable
If both spouses live in a nursing
home but only one is on Medicaid, the one not on Medicaid can
have unlimited income and resources--including even resources
transferred (without penalty) from the spouse on Medicaid.
Can a person become eligible for Medicaid
by giving away their property?
If a person transfers property for less
than market value for the purpose of becoming eligible for Medicaid,
they are “penalized" by being ineligible for Medicaid for about a
month for every $5,000 given away. So for example if you sell your
car worth $10,000 to your son for $5,000, you will be ineligible for
Medicaid for one month. And that month will not even begin to run
until you otherwise would have qualified for Medicaid. You actually
have to be in a nursing home, apply for Medicaid and get denied,
just to start the clock running.
However, Medicaid “looks back” at gifts
only if they are made within 60 months of the month of application.
If you wait more than that 60-month period to apply, you won’t even
have to disclose the gift.
Are there any reasons not to give away
property to become eligible for Medicaid?
The decision as to whether and how to
give away property to become eligible for Medicaid is usually a
If the resources involved are sufficient
to pay for the nursing home stay, transferring them may deprive you
of the opportunity to stay in one of the better homes, some of which
are not certified for Medicaid.
Qualifying for Medicaid almost
always rules out staying in an Assisted Living Facility,
which is generally more desirable if one can meet your care needs.
That is--Do you really want to make Medicaid nursing home care the
cheapest way of taking care of you?
Another disadvantage of Medicaid
is that when the beneficiary goes to a hospital from the
nursing home, they may not be able to return to the same nursing
home, in the event that it fills up while they are in the hospital;
and they are likely not to be able to return to the same room.
beneficiaries of the transfer may use up the property, undergo a
divorce, have it seized by creditors or die leaving it to other
people, so the person making the gift does not have enough money
available to pay for nursing home care during the “penalty period"
of up to 60 months.
If the transfer is of property (such as
real estate or stock) worth substantially more than when it was
purchased, it may result in a capital gains tax liability that might
have been avoided by holding the property the rest of your life. If
the person giving away the property does not meet the “medical
necessity” requirement (discussed below), the gift will not result
in eligibility anyway-- except possibly for certain limited home
Family members may disagree as to who
should receive the property; and those who "need" it most urgently
may be the least capable of managing it wisely. Just as a matter of
values, you may want to pay your own way as long as possible.
However--You may give away your property
for any reason, as long as the transfer is not motivated to any
degree by intent to qualify for Medicaid, and there should be no
adverse effects on your Medicaid eligibility. For example,
you can give your daughter money to pay medical bills, as long as
you are not doing it (even in part) to qualify for Medicaid.
Likewise, you can make certain gifts that do not create a transfer
period even if they are intended to qualify you for Medicaid--such
as gifts to your spouse or to your child with a disability.
However, if you presently have a need for
long term care or anticipate such a need in the near future, you
will have difficulty proving the transfer was not to some degree
motivated by intent to qualify for Medicaid.
What can one do if they have too much
income for Medicaid eligibility and too little income to pay for
nursing home care?
This is where the Qualified Income Trust
or Miller Trust will help. You can always qualify for Medicaid
regardless of your income by running it through this kind of trust.
Also, it may be possible to show that some kinds of income, such as
the “aid and attendance” part of VA pension, does not count. I’ve
seen families pay thousands of dollars for years because they did
not know about this.
If one's spouse needs to go to a nursing
home, do the other spouse have to use up all of their assets before
he/she will be eligible for Medicaid?
The spouse at home, called a “community
spouse," is entitled to keep an amount called a “protected resource
amount." The starting point is to subtract from all the couple's
property (community and separate) certain exempt property including
homestead, household goods, personal goods, one car, etc. The
property is valued as of the first day of the first month the spouse
who needs Medicaid is in a nursing home. The “protected resource
amount" is one-half of the remaining amount, provided it cannot (at
this writing) be less than $24,180 nor more than $120,900. These
figures change with inflation, usually annually.
In addition, the community spouse is
allowed to keep a certain amount of countable income of the
institutionalized spouse—enough necessary to provide the current
"spousal needs allowance." In the year 2017, the maximum "spousal
needs allowance" is 3,022.50 per month. If the combined countable
incomes of both spouses (after certain deductions) exceed the
"spousal needs allowance," the excess amount (to the extent it
consists of income of the spouse in the nursing home) must be paid
to the Medicaid program (as "copayment").
If the combined incomes of the spouses
are not sufficient to provide the community spouse the full "spousal
needs allowance," the couple has a right to obtain an increase in
the protected resource amount sufficient to produce enough income to
provide the spousal needs allowance. For example, if the spouses’
combined noninvestment incomes (after the $60 per month personal
needs deduction) total $2,600, the spouse at home can keep enough
assets to produce an additional 3,022.50 – 2,600 = $422.50 per
month, at the rate of interest being paid locally on one-year
certificates of deposit. In this example, if CD’s are paying 0.5%
interest, the spouse at home can keep at least $1,014,000.
Are there non-financial requirements for
Most Medicaid programs require that the
applicant show a “medical necessity” for nursing home care. That is,
the applicant must need at least LVN-level nursing care on a daily
basis. A need for help with “activities of daily living,” such as
bathing, grooming and eating, is not sufficient in itself.
Ironically, in order to receive home care
under the Medicaid “Star+Plus Waiver Program,” you have to prove
that what you really need is nursing home care meeting this
standard. However, it is possible to qualify for home care under the
“Community Care” programs without proof of “medical necessity"--just
that you need a certain level of help with “activities of daily
If one applies for Medicaid, will the
government take everything I have?
The Medicaid program never takes property
away from anyone--at least, not during their lifetime. It just
refuses to provide help until you meet the program's requirements,
which means (unless there is a spouse at home) your savings are
exhausted. Under the "estate recovery" program, however, Medicaid
can sometimes force sale of a Medicaid recipient's home after their
lifetime. This program applies only to people who have received
Medicaid benefits at or after age 55 and first qualified for
Medicaid in an application filed on or after March 1, 2005. People
who filed an application before that date for a Medicaid program
subject to estate recovery are exempt. Also, there are some
important exemptions and waiver provisions.
How can a lawyer help with Medicaid
A lawyer can identify and implement
strategies that protect property from the Medicaid estate
recovery program. It is quite rare for someone who qualifies for
Medicaid with the help of an attorney to have their home taken
by estate recovery. If Medicaid is needed, a lawyer can show
you ways of qualifying sooner rather than later. Typically, half
or more of the countable assets can be transferred and Medicaid
eligibility reached in half the time; and a couple with low
incomes can qualify one spouse immediately without spending down
at all. But Medicaid is not for everyone. A lawyer can help you
decide whether or not becoming eligible for Medicaid is right
A lawyer can help you avoid small
mistakes that cost big money. For example, a small life
insurance policy can cost you months of eligibility if it is not
dealt with before applying; and each month's delay is likely to
cost $5,000 or more in nursing home expenses. Likewise, Medicaid
workers sometimes make mistakes that would cost months of
eligibility if you just accepted their decisions.
A lawyer can keep you from wasting
your valuable time with information you don't need. We often
talk with very capable people who have spent dozens of hours
developing strategies that will never work, because they missed
one little rule or exception to a rule. Getting a Medicaid
application through is like baking a cake. If you put in all the
right ingredients at just the right time, it rises and you get
what you want. But if you miss one thing, it falls flat and you
lose months of eligibility. Put another way--if you work really
hard and get 99% of it right, the application will still be
denied because of that missing 1%.
About Clyde Farrell
Clyde Farrell of Farrell & Pak
PLLC represented the state of Texas as an Assistant Attorney
General for ten years to enforce the laws requiring nursing homes to
take good care of people. Since then, for the last 24 years, he has
been helping people plan to get the best care they can in nursing
homes, assisted living facilities or at home. Sometimes that
involves protecting assets while qualifying for Medicaid, and
sometimes it involves avoiding Medicaid. Mr. Farrell is a Certified
Elder Law Attorney and a Certified Financial Planner practitioner.
About Farrell & Pak PLLC
Farrell & Pak, PLLC is a small law firm
in Austin with a focus on helping people plan for long-term care for
themselves or family members. Sometimes that involves planning for
Medicaid or getting eligible for Medicaid. Sometimes it involves
planning to avoid Medicaid benefits. And for almost all our clients,
we draft essential legal documents like wills, trusts and powers of
attorney. To learn more about Farrell & Pak go to
www. txelderlaw.com or you can call 512.323.2977
And remember...the more knowledge you have the better decisions
you will make.
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