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Medicaid Planning: What Can a Healthy Spouse Keep?

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Medicaid planningElder law attorneys help people position their assets with future Medicaid eligibility in mind.

Why would this program be relevant to someone that is going to qualify for Medicare as a source of health insurance? Most seniors will need paid living assistance eventually according to the Department of Health and Human Services, and Medicare does not cover custodial care.

In our area the median annual cost for a private room in a nursing home in our area last year was over $155,000. The average length of stay is approximately two years, and a married couple may eventually face two different rounds of nursing home bills.

Medicaid will pick up the tab if you can gain eligibility, and this is why it should be on your radar even if you are going to qualify for Medicare.

Spousal Allowances

Since Medicaid is a need-based program, there is an asset limit. In New York, the limit in 2021 is $15,900. In the big picture, this is not a lot of money, but the asset limit in most states is just $2000.

If you are married and you seek Medicaid eligibility to pay for a stay in a nursing home, your spouse would be entitled to a Community Spouse Resource Allowance. This is half of the assets that are counted up to a limit that stands at $130,380 this year.

There is also a minimum allowance of $74,820 in New York. A healthy spouse would be able to keep this much even if it is more than half of the assets.

Income that is brought in by the spouse that is living in a nursing home must be contributed toward the cost of the care that is being received, but there is an exception to the role. If a healthy spouse needs the income, they can continue to receive it.

This is called the Monthly Maintenance Needs Allowance, and there is a $3259.50 limit during the current calendar year.

Home Ownership

A home is not considered to be a countable asset for Medicaid eligibility purposes, but there is a $906,000 equity limit. There is no equity limit when a healthy spouse is remaining in the home.

We should point out the fact that all of these limits are indexed annually to account for inflation, so you will see higher figures next year.

The fact that you can potentially qualify for Medicaid as a homeowner can give you a false sense of security. Yes, this is possible, but there is a Medicaid estate recovery mandate.

If you use Medicaid to pay for long-term care, the program would be required to seek reimbursement from your estate after your death. Your home would be in their cross-hairs it was in your direct personal possession at the time of your passing.

They would place a lien on the property under these circumstances, but there is an exception to the rule.

If an adult child has been living in the home providing care that has kept you out of a nursing facility for at least two years, you can give the home to the child. It would be protected during the recovery phase, and the transfer would not be subject to the five-year look back period.

This five-year interim is in place to prevent reactive divestitures. You can divest yourself of assets in an effort to qualify for Medicaid, but you have to complete the divestitures at least five years before you submit your application.

Your eligibility is delayed if you violate this rule. For example, let’s say that the state determines that the average cost for a year in a nursing home is $150,000. You gave away $300,000 two years before you need nursing home care.

This amount would pay for two years of care, so your eligibility would be delayed by two years.

Schedule a Nursing Home Asset Protection Consultation!

If you implement an effective nursing home asset protection plan, you can preserve your legacy for the benefit of your loved ones. For many people, a Medicaid trust will be the solution.

The principal in the trust would not count if you apply for Medicaid. Until and unless you apply for Medicaid, you could receive distributions of income that is generated by the assets in the trust.

We are here to help if you are ready to get started. You can schedule a consultation at our Staten Island estate planning office if you call us at 332-456-0500, and you can fill out our contact form if you would rather send us a message.

Neil O'Reilly
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About Neil O'Reilly

Cornelius (“Neil”) J. O’Reilly is an attorney whose practice is focused in the areas of Estate Planning, Estate Administration, and Business Succession Planning. His main goal is to demystify Estate Planning for his clients so they can gain peace of mind knowing that they have provided for their families by passing along their hard-earned wealth and by minimizing the stress they will experience if the client becomes incapacitated or dies. He has created the firm with the belief that an estate plan should be driven by the unique needs and desires of each unique client. That’s why there are no “cookie cutter” plans or canned solutions offered to any client. Instead, Neil helps clients identify their goals and then builds estate plans based on those goals.