Your parents are retired teachers, and they used careful budgets and frugal spending habits to pay off their home and save a small nest egg. They were hoping to leave both to their children and grandchildren. But now that they need nursing home care, they’re worried they’ll have to sell their house and use up their savings to pay for it. Their Medicare won’t cover long-term nursing home stays, and they don’t think they can qualify for Medicaid because of their home and the nest egg.

While Medicaid is intended for financially limited people and applicants do need to meet an asset limit to qualify, there are ways for people, like your parents, to qualify when they’re over the asset limit. To find out how, keep reading or contact our team of professionals at Eldercare Resource Planning.

Definition of Medicaid’s Asset Limit

Medicaid applicants have to meet two requirements in order to qualify – an asset limit and income limit. This article focuses on the asset limit. If you want to learn about the income limit, click here.

In most states in 2024, the individual asset limit to receive Medicaid coverage for long-term care in a nursing home, at home or other places in the community is $2,000. This means the applicants must have $2,000 or less in countable assets. Almost all assets are countable, including bank accounts, retirement accounts, stocks, bonds, vacation homes, secondary vehicles, cash and anything else that can be easily converted into cash. Some assets are exempt, including the home in most cases, but we will discuss those details below. Essential household appliances and furniture is also exempt, as are primary vehicles and personal items like clothing and wedding rings. The asset limit can change depending on the applicant’s state of residence, their marital status and the Medicaid program.

Sharing Assets with Your Spouse: Community Spouse Resource Allowance

For married applicants, Medicaid counts the assets of both spouses toward the asset limit of the applicant or applicants. When both spouses are applying for Medicaid’s long-term care coverage, the asset limit in most states is a combined $3,000 or $4,000. However, when just one spouse is applying, the non-applicant spouse is allowed to keep up to $154,140 in assets (in 2024). This is known as the Community Spouse Resource Allowance (CSRA).

So, a married applicant with a non-spouse applicant can be over the $2,000 asset limit and still qualify for Medicaid as long as they can give their excess assets to their spouse as part of the CSRA. The exact amount of the CSRA can change depending on the state, year and the couple’s financial situation. To learn what it might be for you and your spouse, contact us.

Strategies to Reduce Assets If You’re Over the Medicaid Limit

To make sure applicants don’t just give away their assets to get under the limit, Medicaid uses the Look-Back Period. In most states, the Look-Back Period is five years, which means the state Medicaid agency will look back into the applicant’s financial history for the five years prior to their application date. If they find the applicant has given away any assets, or sold them at less than fair market value, they will deny the application and could penalize the applicant with a period of ineligibility. without violating Medicaid rules.

However, there are ways to reduce your assets and get under the limit without violating the Look-Back Period. There are also some methods that will violate the Look-Back Period but could be useful in certain situations. For an overview of the most common strategies, keep reading.

Spend Down

A common strategy for reducing assets is simply spending them until you are under the limit, which is known as spend down. You can spend on yourself or your spouse, but you can not spend on anyone else, even other family members, because that is considered giving away assets and would violate the Look-Back Period. You should also avoid buying expensive luxury items that can be easily liquidated, like a second car or high-end jewelry, because they will count against the asset limit. But you could do things like repair your home, take a vacation or buy a new refrigerator.

Funeral Trusts

Medicaid applicants can reduce their assets and gain eligibility by purchasing an Irrevocable Funeral Trusts. Buying one of these trusts does not violate the Look-Back Period and it will not count against the asset limit. Most states put a $15,000 limit on the amount of money you can put into an Irrevocable Funeral Trust, which will be eventually be used to pay for your funeral and burial expenses. These types of trust must strictly follow the guidelines to comply with Medicaid rules.

Annuities

Purchasing a Medicaid Compliant Annuity will reduce your assets without violating the Look-Back Period and provide you with a steady income stream. It works like this: You buy the annuity from an insurance company with a lump sum of money, and the company pays you back that lump sum in monthly payments over a predetermined period of time. It should be noted that the income will count against Medicaid’s income limit. Like Irrevocable Funeral Trusts, these type of annuities must strictly follow the guidelines to be considered Medicaid Compliant, which includes being irrevocable, fixed and immediate. Learn more about these guidelines and Medicaid Compliant Annuities.

Asset Protection Trusts

Any asset placed in a Medicaid Asset Protection Trust will not be counted against the asset limit, but creating these trusts violates the Look-Back Period. So, to use them to gain Medicaid eligibility, you would need to do it five years (in most states) before you needed Medicaid’s long-term care coverage. Knowing that timing in advance is difficult, so using one of these trusts is not for everyone. They are also expensive to create and are usually reserved for people who have $100,000 or more in assets to protect.

Half a Loaf

Half a Loaf strategies also violate the Look-Back Period. In these situations, the applicant gives assets to their family so they can have those assets as an inheritance. This is a violation of the Look-Back Period and will lead to a period of ineligibility, but the applicant has kept enough of their assets to pay for their long-term care during that period. By the time they run out of assets, they will be allowed to apply for Medicaid again and now they will be under the asset limit.

How Home Ownership Affects Medicaid Eligibility

If the home was counted as an asset, most homeowners would be well over their asset limit for Medicaid eligibility. But in many cases, the home is not counted as an asset, depending on what state you live in, how much your home is worth, how much of it you own, who lives there and your intent to return. There are also ways to transfer ownership of the home without violating the Look-Back Period, such as the Child Caregiver Exemption and the Sibling Exemption.

While the home is protected from the asset limit in many scenarios, those same scenarios don’t always protect it from Medicaid Estate Recovery. Every state is required by law to try and collect reimbursement for Medicaid long-term care expenses after the beneficiary’s death, a process known as estate recovery. This is often done through the home. To learn more about protecting your home from Medicaid Estate Recovery, click here.

How a Certified Medicaid Planner Can Help If You’re Over the Asset Limit

Reducing your assets in a timely manner is essential for many people who need Medicaid’s long-term care coverage. It can also be complicated, which is why we recommend consulting with us before trying it on your own.

Our Certified Medicaid Planners will know Medicaid’s asset limits in your state, what the limits are in your specific situation and which of your assets will count toward that limit. If you’re over the limit, they’ll know which strategies might work.

If you choose to spend down your assets, a Certified Medicaid Planner can make sure you spend them in the right way. If you want to buy an Irrevocable Funeral Trust or a Medicaid Compliant Annuity, our team will help you buy the right one for the right amount of money. There are salesmen who might offer you one of these financial products that won’t comply with Medicaid rules, and it might take a professional to recognize the problem before it’s too late.

If you’re a homeowner, a Certified Medicaid Planner can help you understand the home ownership rules and limits in your state, how they impact your home and if it’s exempt from the asset limit. If it is, they can help you stay in the home and receive care, if that’s what you want. Or they can help you keep the home in the family as an inheritance even while you’re living in a nursing home.

Qualifying for Medicaid when you’re over the asset limit can be tough, but it’s much easier with a Certified Medicaid Planner on your side. Connect with one now by clicking here.