Consumer's Guide to Medicaid Planning
Last week I shared part one of my Consumer's Guide to Medicaid Planning. This week I would like to focus on part two of the guide which deals with what assets a single person or if married, the couple are allowed. I will also address some of the frequently asked questions I encounter from clients.
There are very specific guidelines of this benefit program that must be followed. Often, qualifying requires careful planning. Failing to follow these steps may delay benefits or disqualify someone altogether. Lets look at what assets are allowed under the Medicaid rules.
Exempt Assets and Countable Assets:
What Must Be Spent?
To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and nonexempt (or countable) assets.
Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:
Homestead and any adjacent real estate. The home must be the principal place of residence.
Personal belongings and household goods
One vehicle
Irrevocable prepaid funeral contract
Burial spaces and certain related items for the applicant and spouse
Up to $1,500 designated as a burial fund for the applicant and spouse
Value of life insurance if the face value is $1,500 or less
All other assets are generally non-exempt, and are countable. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt.
This includes:
Cash
Savings, and checking accounts
Credit union share and draft accounts
Certificates of deposit
U.S. Savings Bonds
Individual Retirement Accounts (IRA), 401K, 403B, 457, Keogh plans
Nursing home accounts
Prepaid funeral contracts which can be canceled
Trusts (depending on the type of the trust)
Real estate (other than the primary residence)
More than one car
Boats or recreational vehicles
Stocks, bonds, or mutual funds
Land contracts or mortgages held on real estate
While the Medicaid rules themselves are very complicated, it’s safe to say that a single person will qualify for Medicaid as long as he or she has only exempt assets plus no more than $2000.00 in countable assets.
Some Common Questions:
I’ve added my kid’s names to our bank account. Do they count all the money in the account?
Yes. The entire amount is counted unless you can prove some or all of the money was contributed by the other person who is on the account. This rule applies to cash assets such as:
Savings and checking accounts
Credit union share and draft accounts
Certificates of deposit
U.S. Savings Bonds
Can’t I Just Give My Assets Away?
Many people wonder, can’t I just give my assets away? The answer is, maybe, but only if it’s done exactly right. The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. For approximately every $10,000.00 given away during the five years prior to the filing of a Medicaid application creates a one month penalty period
under the Medicaid rules. So even though the Federal Gift Tax exemption allows you to give away up to $16,000 per year without gift tax consequences, those gifts would result in a penalty period under the Michigan Medicaid rules. Though some families do spend virtually all of their savings on nursing home care, Medicaid does not require it. There are a number of legal strategies which can be used to protect your family financial security.
Next week I will share part three of my Consumer's Guide to Medicaid Planning which explores some various case studies of clients and how they qualified for Medicaid. Stay tuned!
This blog post is written by Brett A. Howell, Certified Elder Law Attorney. The blog is written as a service of The Elder and Estate Planning Law Firm, P.L.L.C. This information is for general informational purposes only and does not constitute legal advice. For a consultation to address specific questions, please call (810) 953-3846.
