To qualify for Medicaid Long Term Care, an applicant has to meet financial limits when it comes to their income and their assets. This article will focus on assets, and ways an applicant can qualify for Medicaid Long Term Care even if they are over the asset limit.
Knowing and Understanding Medicaid’s Asset Limits
The qualifying asset limits vary by state, marital status of the applicant, if one or both spouses are applying, and what type of Medicaid Long Term Care they are applying for. Further complicating things, is the fact that some limits change every year while other remain relatively consistent. In addition to just knowing the asset limits, it can also be a challenge to understand what they mean relative to your family’s financial situation.
The asset limit for single applicants in most states for 2022 is $2,000, meaning one must have $2,000 or less in countable assets (what assets are countable is detailed below) to qualify for all three types of Medicaid Long Term Care – Nursing Home, Home and Community Based Service Waiver (HCBS), and Aged, Blind and Disabled (ABD). There are some states which are exceptions when it comes to the asset limit for Medicaid Long Term Care applicants – New York allows single applicants to have up $16,800 in assets, while Connecticut’s limit is $1,600.
For married couples who are both applying for Medicaid Long Term Care, the asset limit in most states for 2022 is a combined $3,000 for all three types of Medicaid Long Term Care, but there are also some exceptions here. Massachusetts allows both spouses up to $2,000 (or $4,000 combined), while New York allows a combined $24,600. Florida’s limit is $3,000 for Nursing Home and HCBS, but it jumps to $6,000 for ABD Medicaid.
Things get more complicated when one spouse is applying for Medicaid but the other is not. In most states, including California, Texas and Ohio, the 2022 asset limit for the applying spouse is $2,000 and the asset limit for the non-applicant spouse, also called the community spouse, is $137,400 for both Nursing Home and HCBS Medicaid. When it comes to ABD Medicaid, the asset limit in most states is a combined $3,000 even when one spouse is applying and the other is not.
Again, there are exceptions here. In South Carolina, for example, the 2022 asset limit is $2,000 for the applicant spouse and $66,480 for the community spouse. In New York, it’s $16,800 for the applicant and $137,400 for the community spouse. Since these asset limits do vary depending on situation, consulting with a Certified Medicaid Planner can help you figure out which limits apply and which type of Medicaid Long Term Care is best for you or your loved one. To schedule a free consultation with a Certified Medicaid Planner, start here:
Which Assets are Countable and Which are Exempt from Medicaid’s Asset Limit?
Assets that can be easily converted to cash, also known as liquid assets, generally count against the limit when it comes to qualifying for Medicaid Long Term Care. This includes stocks, bonds, certificates of deposit, vacation properties and, of course, cash.
However, not all assets are counted against the limit. If the applicant is going to receive benefits at home (through HCBS or ABD Medicaid), that home and it’s furniture and appliances are not countable. The same is true if only half of a married couple is applying, the couple’s primary home, furniture and appliances are not counted, as long as the non-applicant spouse is living at that home. The clothing and automobile for the community spouse are also non-countable assets. Other exempt assets include irrevocable funeral and burial trusts, annuities, and life insurance policies up to a certain face value (usually $1,500). There are more details on these types of assets below.
Homes are not always exempt though. If neither an applicant nor their spouse live in the home, it is not exempt. If their home equity exceeds a certain value (which changes annually and by state), the home may not be exempt.
Approaches for Qualifying for Medicaid When Over the Asset Limit
If applicants are over the asset limit for their state and their Long Term Care Medicaid situation, there are still ways they can get under the limit and become eligible.
Community Spouse Resource Allowance
When only one spouse of a married couple is applying for Nursing Home Medicaid or HCBS Medicaid, federal spousal impoverishment rules allow the non-applicant spouse to keep enough of the couple’s assets (and income) so they don’t have to live in poverty. As noted above, in most states in 2022 the community spouse is allowed to keep to $137,400 in assets (otherwise knows as the Community Spouse Resource Allowance or CSRA), while the applicant spouse is allowed, again in most states, to keep only $2,000 in assets.
The exact amount of the CSRA varies by state, but it must be within the parameters of the minimum and maximum CSRA set forth by the federal government. For 2022, the minimum is $27,480 and the maximum is $137,400.
However, some states only allow the community spouse to keep 50% of the couple’s assets up to the cap. In these states, half of the couples’ assets are assigned to the applicant and the other half assigned to the non-applicant. If the community spouse’s half of the assets falls under the maximum asset limit ($137,400 for most states in 2022), this is often the amount of the CSRA. These states also use the minimum asset limit to protect couples with limited resources.
For example, if a couple in a 50% state has $160,000 in countable assets, the CSRA is $80,000 ($160,000 / 2 = $80,000) and the applicant’s assets are also considered to be $80,000. Because the applicant spouse is only allowed to have $2,000 in assets, $78,000 in assets must be “spent down” (more on this below) for the applicant to be asset eligible. But if a couple only has $20,000 in assets in a 50% state, the CSRA is $20,000 (meaning the community spouse can keep all of the couple’s assets) because the asset total is below the federal minimum of $27,840. The 50% states are Alabama, Arizona, Arkansas, Connecticut, Delaware, Idaho, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin, as well as Washington, D.C.
In 100% states, there is only standard dollar amount for the CSRA (instead of a maximum and a minimum). In most states, this amount is $137,400, meaning the community spouse can keep 100% of the couple’s countable assets up to $137,400. For example, if a couple has $100,000 in countable assets in a 100% state, the CSRA is $100,000. If a couple has $150,000 countable assets in a 100% state, the CSRA is $137,400. Assuming the applicant’s asset limit is $2,000, as it is in most states, $10,600 must be “spent down” for the applicant to become asset eligible. ($137,400 + $2,000 = $139,400. $150,000 – $139,400 = $10,600). The 100% states are Alaska, California, Colorado, Florida, Georgia, Hawaii, Illinois, Louisiana, Maine, Minnesota, Mississippi, South Carolina, Vermont and Wyoming.
Shifting assets from the applicant spouse to the community spouse in the form of a CSRA is one way for the applicant to lower their assets in order to meet the asset limit, but it’s not the only way. Listed below are multiple options for the applicant when it comes to spending down, or lowering, their countable assets, including ways to protect their home for their spouse or their loved ones. These methods can often be complicated, or may need to be done years before long term care is actually needed. Making a mistake in this process can lead to Medicaid disqualification, so consulting a Certified Medicaid Planner when it comes to asset limits and spending down is recommended.
Asset Reduction Strategies
• Allowable Spending – Applicants can reduce their asset total by spending some their cash on allowable expenses. These include home modifications or improvements, such as adding a chair lift or a wheelchair ramp, putting on a new roof, or replacing the hot water heater. One may also purchase medical devices that are not covered by insurance, like dentures, and pay off a mortgage or credit card bills to reduce countable assets.
• Annuities – For married couples with only one spouse applying for Nursing Home Medicaid or a HCBS Medicaid Waiver, purchasing an annuity turns countable assets into non-countable income for the community spouse. In order to do this, and applicant buys the annuity from an insurance company with a lump sum of cash and that insurance company then gives the community spouse a monthly payment derived from the initial lump sum. To be Medicaid eligible, these annuities must be irrevocable, must start payments immediately upon creation, and they must not exceed the life expectancy of the recipient.
• Gifts – Simply giving, or gifting, assets to someone will not lower your asset limit, unless it is done 60 months (5 years) before applying for Medicaid. This is because there’s a 60-month “look back” period that immediately precedes one’s date of Medicaid application. If there are significant assets gifted during this time frame, the applicant will receive a penalty period for Medicaid eligibility, which means they have to wait longer to receive benefits. California only has a 30-month “look back.”
• Half a Loaf – This strategy is for applicants who have enough assets to cover their long term care costs during a Medicaid penalty period. In short, the applicant gifts half of their assets to a family member, which triggers the penalty period, but they use the other half of the assets to buy a Medicaid compliant annuity that will cover their care costs during the assumed penalty period. This is another complicated process and consulting with a CMP is highly recommended before using this strategy.
• Irrevocable Funeral Trusts – These trusts are created to pay for the applicant’s funeral in advance, and since they are not countable assets, they can be used to reduce the applicant’s asset total by up to $15,000, or up to $30,000 for married couples. These trusts are relatively simple to set up and require no legal fees, but be aware that are some pre-pay funeral options that sound like Irrevocable Funeral Trusts but are not, and therefore they are not Medicaid exempt.
• Medicaid Divorce – This practice has become uncommon since the CSRA was instituted, but if a couple has more than $500,000 in assets, a Medicaid divorce may still make sense. Divorcing can allow the community spouse to keep a significantly greater amount of the couple’s assets instead of using them on long term care. This is a complicated process that can’t be used in all states, so consulting a CMP before going through with a Medicaid divorce is highly recommended.
• Spousal Refusal – Even though community spouses are legally obligated to cover the cost of Medicaid Long Term Care for their applicant spouses, the community spouse can refuse to make their assets available. This can be a risky and complicated strategy and has generally only been allowed in Florida and New York.
Home Protection Strategies
• Lady Bird Deeds – This allows applicants to keep their home as a future inheritance for their loved ones. With a Lady Bird Deed, the Medicaid recipient is still considered the owner until they pass away, at which point the home is immediately transferred to the named beneficiary. This protects the home from Medicaid’s estate recovery program, which allows states to collect reimbursements of funds used for long-term care.
• Child Caregiver Exceptions – Medicaid applicants are allowed to transfer their home to one of their healthy adult children as long as that child has lived with their aging parent for at least 2 years prior to the parent’s admittance into a nursing home, and provided a level of care that prevented the parent from needing nursing home care during that time. If not done correctly, this can violate Medicaid’s “look back” rule.
• Sibling Exception – This allows the Medicaid applicant to transfer their home to a sibling under certain conditions. First, the sibling must share ownership of the house. Second, the sibling must have lived in the home for a minimum of one year immediately preceding the institutionalization (placement in a nursing home) of the Medicaid recipient. Again, if the transfer happens without the criteria being met, transferring the home will violate the Medicaid “look back” rule.