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What is Except from Medicaid Spend Down?

What Assets are Exempt from Medicaid Spend Down?

In order to smoothly move toward Medicaid eligibility, it is important to identify which assets are subject to the Medicaid spend down process, and are considered countable assets, and which assets are exempt assets from such consideration. Loved ones and family members would be advised to analyze a prospective nursing home resident’s financial assets prior to the long-term care and/or before the application process, or as soon as possible once the importance of the endeavor has been identified.

Some assets are almost always considered countable assets: bank accounts, iras, surrenderable annuities, retirement accounts, cash value of life insurance policies, etc. Most states, including Missouri, also have a readily available list of non-countable assets that are disregarded by the Medicaid program for a Medicaid applicant: These include:

Equity in a Primary Residence. Equity in the primary residence, or previous home of long-term care recipient is an exempt asset for Medicaid coverage purposes. Most states presume an intent to return home in the event that the care recipient improves and is able to return to the community. Most state’s have an equity limit on the fair market value of the home that will be exempt, typically approximately $750,000 ($713,000 in Missouri). While one’s home is generally exempt from Medicaid’s asset limit, it is not exempt from Medicaid’s Estate Recovery Program. Following a long-term care Medicaid beneficiary’s death, Missouri’s Medicaid agency attempts reimbursement of care costs through whatever estate of the deceased still remains. This is often the home. Without proper planning strategies in place, the home will be used to reimburse Medicaid for providing care rather than going to family as inheritance

Automobile. One automobile, and in some states two, are exemptions from consideration when determining the availability of Medicaid benefits. In order to maximize the exempt assets while still qualifying for Medicaid, most states will exempt the value of the most valuable automobile if there are multiple vehicles. This exemption typically applies even if the applicant or applicant spouse is unable to drive. The Medicaid rules presume that the vehicle still has personal value to the applicant; perhaps the individual could be driven to medical and health care appointments for other care services by a caregiver or a family member.

Household Goods. Typically, all household goods and personal belongings are exempt from consideration by Medicaid. High value items, such as jewelry or artwork, could cause ineligibility, but that is rare. If an individual does, however, hold some particularly valuable items, it would smart to engage in Medicaid planning in order to minimize any surprises at the time of the Medicaid application.

Burial Expenses and Prepaid Funerals. If structured properly, funeral expenses will be considered exempt and are not subject to spending down assets. Please refer to our page on Preneed Burial Plans for details.

Assets Held in an Irrevocable Trust. Assets held in an irrevocable trust, outside of the control of the Medicaid applicant, will be exempt from eligibility requirements, as long as the trust complies with the applicable Medicaid regulations. For most trusts, this means that the trust must have been set up prior to the Medicaid Look Back Period of five years. Otherwise, the transfer would considered gifting and an improper asset transfer and would potentially invoke a penalty period before Medicaid benefits would begin.

Asset Exemptions for Community Spouses. For married couples, additional assets which are normally countable assets, can be assigned to the community spouse under a properly filed Division of Assets. If a Division of Assets is filed, the state will assign to the community spouse otherwise countable assets, under the Community Spouse Resource Allowance, or CSRA. This filing can allow excess assets, over and above the normal Exempt Assets to be held by the family while still qualifying for Medicaid. Additionally, the Division of Assets can also allow the community spouse to receive excess income as monthly income (over and above the normal income limit) in order to live.

The bottom line is that the earlier the analysis process begins, the better off the family will be. Estate planning may need to revised, strategic gifting may need to begin immediately. However, no matter when the Medicaid planning begins, much can be done to improve any situation. Contact QMC.

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