Medicaid Exempt Assets

Under Medicaid, the combined assets of spouses are available for the care of the ill or “institutionalized” spouse, regardless whose name those assets are in.

Nevertheless, many assets or “resources” are exempt from Medicaid when there is a spouse at home (the “community spouse”). These are:

• The home up to a value of $1,071,000

• $74,820 to $154,140 in resources

• One automobile

• Prepaid funeral and burial for applicant and spouse

• Household furniture, personal effects, jewelry with sentimental value

• IRA’s, 401(k)’s and other qualified plans, provided they are paying out a monthly income

• Annuities paying out a monthly income naming spouse as primary beneficiary

• Medicaid Asset Protection Trust (MAPT) assets, if held in trust more than five years for facility care and two and a half years for home care

• Assets in trusts set up by someone other than the applicant (or their spouse)

• Supplemental Needs Trusts (also known as “Special Needs Trusts”) for the benefit of a disabled person under age sixty-five

• Pooled income trusts for disabled persons subject to county approval

The above exemptions create some planning opportunities. Should the Medicaid applicant have a disabled child or grandchild, they can immediately protect any assets they choose to place into a Special Needs Trust (SNT) for the child or grandchild.

Since the home is an exempt asset when a spouse is living there, so are repairs and improvements to the home, including new carpeting, appliances, kitchen, baths, modifications for handicapped accessibility, lifts for stairs, etc. A mortgage can be paid off to reduce the amount of assets required to be “spent down” in order to obtain Medicaid eligibility. Although only one automobile is allowed, nothing prevents the spouse from trading in the old clunker for a brand new car.

When there is no spouse, the resource allowance falls to about $30,000. The home and automobile, no longer needed by the applicant, are no longer exempt. Nevertheless, the home may still be protected if an adult child was living in the home and caring for the parent for the two year period immediately prior to the parent entering the nursing home under the “primary caregiver” rule. Care in this context is interpreted broadly. The home may also be protected if a sibling of the applicant lived in the home for at least one year and has an “equity interest”, the latter term also being broadly interpreted. All of the other exemptions listed above, if there is a spouse, also apply if there is no spouse.

Income exemptions also depend on whether or not there is a spouse. For nursing home care, the community spouse may keep about three thousand eight hundred and fifty dollars per month of the couple’s income. In the case where the spouse’s income exceeds the threshold, the spouse may keep most of his or her own excess income as well. The rules also allow keeping greater “resources” to generate the income necessary to meet the exemption, if the income is not otherwise available, although this must be applied for. Veterans’ “Aid and Attendance” benefits are also exempt.

Clients often ask whether Medicaid can “go after” the assets when the community spouse dies after the institutionalized spouse. If the assets were exempt, then Medicaid has no “right of recovery” since Medicaid was properly paid. However, if assets are left by will to a surviving institutionalized spouse, Medicaid will assert a claim. If the assets were left to someone other than the spouse, Medicaid may seek to exercise the institutionalized spouse’s “right of election” since spouses are entitled to claim a share of the estate if they are disinherited. Proper planning with an elder law attorney can avoid these unfortunate results.