Medicaid Asset/Income Spend Down

Medicaid Asset/Income Spend Down

It is not unusual for individuals to apply for Medicaid and discover that they own too many assets to meet the requirements. Medicaid is a need-based government program, meaning that your assets have to be below a predetermined limit in order for you to be eligible to receive benefits.

The Federal Government sets the asset limits for Medicaid eligibility. Depending on your income and the value of your assets, you may be required to "spend down" a good portion of your assets before you are eligible for Medicaid. However, you must be very careful when doing so or you may become ineligible for Medicaid benefits for an extended length of time.

What Does Spending Down Your Assets Mean?

Spending down your assets simply means reducing the amount of assets you own in order to qualify for Medicaid. One of the biggest misconceptions people have is that you have to go broke in order to qualify for Medicaid. But this is simply not true.

There are many ways to qualify for Medicaid benefits quickly, while legally sheltering your assets from Medicaid spend down. This is perfectly legal and does not involve hiding anything from the Medicaid agency.

Proper Medicaid planning must be done lawfully and with consideration for both federal and state-specific Medicaid rules. So, while federal guidelines may say one thing, it is very important to know what your state has put in place in reference to those federal Medicaid rules.

Non-Countable Assets

Not all assets count when determining eligibility for Medicaid benefits. Many assets are considered non-countable for the purpose of determining Medicaid eligibility, including:

  • Your principal residence;
  • Personal property;
  • Household goods and furnishings;
  • One car per family;
  • Prepaid funeral and burial policies; and
  • A limited amount of cash

There are also other types of assets that may be considered non-countable. However, these determinations will need to be made on a case-by-case basis and in accordance with the Medicaid rules for the state in which you reside.

Asset Sheltering Strategies

The following is a list of some of the strategies available to you to shelter your assets from Medicaid spend down. However, your unique situation should always be reviewed by a qualified Medicaid planning attorney to determine the best path to take.

Make Allowable Spend Down Payments and Purchases

Some payments for permissible expenses and purchases of non-countable assets can be made to reduce the value of your assets to qualify for Medicaid, for example:

  • You can pay your nursing home bills;
  • Pay outstanding debt like mortgage payments and credit card bills;
  • Pay property taxes, income taxes, and capital gains taxes;
  • Pay for home repairs;
  • Prepay funeral and burial expenses;
  • Pay legal fees and medical expenses;
  • Pay travel expenses;
  • Purchase a new home;
  • Purchase furniture;
  • Purchase household goods and personal effects (like TVs and computers); and
  • Buy a new car

Invest in Annuities

Investing a significant amount of money in an annuity for your spouse, that guarantees a specified amount of income for a specific length of time, is an excellent approach to spending down assets for married couples.

This is because your spouse's income will not be counted against you when determining your eligibility for Medicaid. However, the annuity you invest in has to be transferable and your state's Medicaid agency needs to be the primary beneficiary after your spouse passes away.

Pay For Caregiver Services

Many states permit Medicaid applicants to pay for caregiver services, especially when those services will enable the applicant to stay at home rather than in a more costly nursing home. This might also be applicable even if the caregiver is an immediate family member. It should be noted, however, prepayment for these services is not permitted.

Other Asset Sheltering Strategies:

  1. Converting countable assets like cash and investments into non-countable assets: Some transfers made to a spouse or allowed, as long as they are for the spouse's benefit. Similarly, transfers made to a blind or disabled child are allowed.
  2. Create Medicaid appropriate income trusts: Trusts made for the benefit of a blind or disabled child, or for the sole benefit of a disabled individual under the age of 65 are allowed.
  3. Making gifts: It is possible to make appropriate and allowable gifts for the purposes of Medicaid spend down if done properly. But be careful, because if you do this the wrong way you could be ineligible for Medicaid for up to 5 years.

Consult with an Experienced Medicaid Planning Attorney

Proper Medicaid planning doesn't have to be confusing and difficult. If you know the rules, apply the appropriate strategies, and try to plan in advance of any sickness or disability, you can qualify for Medicaid and without having to spend down all of your hard earned assets. To find out more about Medicaid asset spend down, contact a knowledgeable and experienced Medicaid planning attorney for a free consultation.