A family is facing a difficult situation as an elderly relative’s health deteriorates. The individual owns a home and wishes to avoid a nursing home, fearing the loss of her house to qualify for Medicaid. This concern stems from a desire to leave an inheritance for her children.
Medicaid eligibility typically requires minimal assets, usually under $2,000 in countable assets and limited monthly income. This includes retirement accounts, which are considered countable assets in most states, although specific rules vary. A five-year look-back period exists to detect asset divestment to qualify for Medicaid.
However, exceptions to the look-back rule exist, such as paying debts, purchasing medical equipment, or making home accessibility renovations. The individual’s situation requires immediate action, making the five-year look-back period irrelevant in this case.
For married couples, rules differ. If a spouse continues to reside in the home, the property may be exempt from Medicaid asset calculations. Each state establishes a home-equity interest limit. If the homeowner’s equity exceeds this limit, the home may be considered an asset, potentially disqualifying them from Medicaid.
Many states allow for the home to remain exempt if the applicant currently lives there, plans to return, and meets the state’s equity limit. Documentation of intent to return is crucial. Once that intent is nullified, the home becomes a countable asset.
Even if a home isn’t counted toward the Medicaid asset limit, it isn’t necessarily exempt from the Medicaid Estate Recovery Program. After death, the state may seek reimbursement for care costs from the estate, potentially including the home. Any inheritance received while on Medicaid must be reported within ten days.
Proactive planning, such as establishing an irrevocable trust, can help protect assets. This allows the individual to transfer assets, removing them from Medicaid calculations, but relinquishes control. A Medicaid Asset Protection Trust (MAPT) can offer similar protection, but is subject to challenge.
Other assets, such as a necessary vehicle, clothing, furniture, and wedding rings, are generally exempt. However, other items like artwork are not. The family should prioritize the elderly individual’s care and needs before focusing on inheritance. Professional legal and financial advice should be sought to navigate these complex issues and develop a suitable strategy.
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