When an older adult requires services in a long-term care environment, such as a nursing home, the family may seek Medical Assistance. This is a financial program under Medicaid that can help cover the costs of such care.
However, to qualify for Medicaid, you must meet eligibility criteria that includes income and asset thresholds. If the value of your assets exceeds a certain amount, you may have to forfeit them to qualify for Medicaid. This is why many spouses fear losing their home if their significant other goes on Medicaid to help cover long-term care.
The short answer to whether or not you will lose your home in this case is generally no. However, Medicaid planning can be complex. Working with an estate planning lawyer who can help you plan to cover the costs of long-term care while also protecting your assets lets you avoid some of these worries. Find out more about how your assets, including your home, might be impacted if your spouse goes on Medicaid below.
A Spouse Can Keep a Certain Amount of Resources
The assets of both spouses are considered when determining resources for Medicaid eligibility. On the date that someone is admitted to a nursing home or other covered long-care treatment facility, a “snapshot” of assets is taken. That means you can’t simply give away or otherwise change the value of your assets after the fact to support eligibility.
The healthy spouse can keep a certain amount of the couple’s resources. In 2022, the spouse not applying for Medicaid is allowed to keep 50% of the assets up to $137,400.
Homes Typically Fall Under Exempt Assets
That $137,400 figure is why many people fear they will lose their home. A home can easily take up all of that amount or be much more than it. However, homes typically fall under an exemption.
Exempt assets are those that are not included in the calculations to determine Medicaid eligibility. As such, the spouse that isn’t applying for Medicaid can keep any of those assets that he or she owns or owns jointly with the other spouse.
Homes are exempt in many situations. First, if the other spouse, minor children, or certain other types of dependents live in the home, it’s exempt.
Homes can also be protected by declaring an attempt to return home. If the spouse who is going into a nursing home or other long-term care facility indicates his or her intent to return to the home after that care is no longer required, the home can be protected for up to 12 months. That’s true even if the other spouse isn’t living there at the time. Typically, this rule can be invoked even if there’s not a good chance the person will be able to return to home. However, there are some limitations, such as the rule doesn’t apply when the value of the home exceeds a certain threshold.
After the person who applied for Medicaid dies, there are some instances in which Medicaid can force the sale of the home to help recoup its costs. However, if the spouse is still living in the home, Medicaid cannot do this.
What Are Some Other Exempt Assets for Medicaid Eligibility Calculations?
Life insurance, a car, certain types of retirement accounts, and personal effects may all be exempted. In many of these instances, it’s important to use common sense and reason. For example, Medicaid exempts a newer car of reasonable value. However, if a couple buys a luxury car right before one spouse applies for Medicaid, there may be an issue.
Life insurance is only counted if it’s a cash value policy, and you can exempt up to a certain amount. Medicaid doesn’t count death benefit values. Whether or not you can exempt 401k and IRA plans depends on how they are structured. However, the payouts from these plans would be counted as income by Medicaid.
Medicaid also typically doesn’t count personal effects within reason. It won’t start adding up the cost of clothing, kitchen appliances, or other items in the house. However, if the couple made a large or lavish purchase recently, such as a collector’s item worth tens of thousands of dollars, that may be counted.
What Is the Medicaid Look-Back Period?
In the past, people have tried to protect their assets by giving them away to family or friends or transferring ownership of them temporarily to others. Medicaid instituted a look-back period to curtail this behavior. The look-back period is 60 months.
Medicaid may review ownership transfer of any large assets during that period to ensure assets that could have been used to pay for the person’s care weren’t sold at below-market value or gifted to others.
Get Ahead of the Issue With Medicaid Planning
Many people don’t realize that long-term care planning and Medicaid planning are part of the services offered by some estate planning attorneys. At the Law Office of Polly Tatum, we work with you to protect your legacy now and in the future. That includes laying the groundwork to protect you and your spouse if one of you must apply for Medicaid to help cover the costs of long-term care.