If you had to go into a nursing home, do you want your assets to go to the nursing home or to your loved ones? This is a question that we ask all of our estate planning clients when we are designing their estate plans. You can easily guess the usual answer, “My loved ones!”
What you may have been told, incorrectly, is that you have to spend down your excess assets on nursing home care before Medicaid would pay for nursing home care. Under current rules, you can keep your home and certain other assets and still have Medicaid pay for your nursing home care. These are called excludable or exempt assets. Exempt assets include certain pre-paid funeral and burial expenses, one automobile, life insurance with a cash value less than $1,500 and your home with an equity value of $560,000 or less in 2017. All other assets are considered countable assets.
You may be told that if you are single that you must spend down your countable assets below $2,000 to qualify for Medicaid to pay for nursing home care. If you are married, you may be told that your well spouse can also keep one-half of the countable assets, but no more than about $120,000, before you can apply for Medicaid to pay for nursing home care.
What you are likely not told is that Congress has given you numerous family-friendly ways to spend down excess countable assets on things other than the nursing home and still be able to apply and qualify for Medicaid. Most of these expenditures can be made today, and you would qualify for Medicaid to pay for your nursing home care tomorrow.
Expenditures on home repairs or improvements generally do not affect nursing home Medicaid qualification. For example, we had a single client who had about $50,000 in countable assets when she went into the nursing home. The family was able to take those excess funds to pay to finish the basement of her home and immediately qualify her for Medicaid to pay for nursing home care. After her death, the house sold for a much higher price than it would have without a finished basement.
If you are in the nursing home, you can have one motor vehicle. There is no limit on the value of the motor vehicle. That’s doesn’t mean that you should go out and purchase a Rolls-Royce Phantom Drophead Coupe for $492,000. That may be considered a countable investment as opposed to an exempt vehicle.
However, spending a more modest sum is perfectly acceptable. We had an unmarried client in a nursing home, who had about $30,000 in countable assets. Her family used the excess funds of $28,000 to purchase a late model used Honda CR-V. Mom was in a wheelchair and needed to be shuttled around. The family said they purchased the CR-V because the seats were “butt-height” and Mom could be transferred between the wheelchair and the vehicle with little difficulty. After the purchase of the vehicle, Mom immediately qualified for Medicaid to pay for her nursing home care.
We had another situation with a married couple who had $140,000 in countable assets when the wife went into the nursing home. The husband could keep $70,000 of the countable assets. Instead of spending the other $70,000 on the nursing home as they were initially told, the husband used the $70,000 to purchase a brand new specially equipped Dodge minivan from MobilityWorks. He was then able to roll his wife’s wheelchair into the minivan, secure the wheelchair and transport her to various appointments and outings. After the purchase of the minivan, she applied for and was approved for Medicaid to pay for her nursing home care.
The payment of debts will not disqualify you from Medicaid to pay for your nursing home care. For example, a couple had $150,000 in countable assets when the husband entered the nursing home. The wife could keep $75,000 of the countable assets. Instead of spending the other $75,000 on the nursing home as they were initially advised before coming to us, the wife used the $75,000 to pay down on their $90,000 mortgage. Immediately after the mortgage pay-down, the wife applied for and was approved for, Medicaid to pay for her nursing home care.
With a married couple, the well spouse can take excess assets and convert them into a monthly income stream or pension and then the nursing home spouse can apply for Medicaid to pay for nursing home care. A situation came through our office in which a couple had $400,000 in countable assets when the husband went into the nursing home nearly two years before. At the time, they were told that the wife could keep $100,000 of the countable assets and the $300,000 excess would have to be spent down on the nursing home before they could apply for Medicaid to pay for his nursing home care.
They had already spent down $160,000 of the $300,000 in excess countable assets when they came to see us. We were able to arrange a five year monthly pension for the wife with the remaining $140,000, and immediately qualify the husband for Medicaid to pay for his nursing home care. Had they come in two years earlier, we could have protected the entire $300,000 of excess countable assets.
Gifting to Loved Ones or Charities
If you are not married in a nursing home and have the proper instructions in your estate planning documents, you can give countable assets away and still qualify for Medicaid to pay for your nursing home care. In this instance you can give away about half your countable assets to loved ones or charities and use the other half to pay for your nursing home care. If properly arranged, once the other half is spent down on nursing home care, Medicaid will then pay for the nursing home care.
Any fees you pay to your attorneys to assist with Medicaid qualification will not prevent you from applying for Medicaid to pay for nursing home care. It is considered a fee for service. Medicaid has complex rules to determine how much you can have in countable assets and still qualify for Medicaid coverage for nursing home care. The examples discussed in today’s column are only a simplified and partial list of the Medicaid rules affecting countable assets.
When planning for Medicaid to pay for your nursing home care, if you have concerns about assets being exempt or countable, don’t just apply for Medicaid and hope for the best. This then unfortunately can result in months of Medicaid ineligibility and substantial nursing home bills for you and your family. You are generally further ahead to pay the attorneys and have a much higher likelihood of being approved for Medicaid to pay for nursing home care In most instances, it is wiser to consult with a knowledgeable legal specialist with experience in elder law and Medicaid qualification.
By Matthew M. Wallace, CPA, JD
Published edited April 2, 2017 in The Times Herald newspaper Port Huron, Michigan as: Options for nursing home Medicaid qualification