Some people are surprised to hear that Medicaid is very relevant to senior citizens who will qualify for Medicare. Why is this the case? Medicare will not pay for a long-term stay in a nursing home, and these facilities are very expensive.
Medicaid Asset Limit
Medicaid is intended for people with very sparse monetary resources so there is a modest asset limit. We have elder law offices in North Carolina and Kentucky. The limit in both of these states is $2000, and there have been no changes over recent years.
All of the specific figures that we will share in the following sections apply to North Carolina and Kentucky.
Some assets are not counted when Medicaid is tallying up your resources. The most significant non-countable asset is your home, but there is an equity limit. This figure is indexed annually to account for inflation, and it stands at $603,000 this year.
The program wants beneficiaries be able to cover their final expenses if possible, so prepaid burial plots are permitted along with $1500 saved for funeral costs. Or in lieu of the funeral savings, the same amount of whole life insurance is allowed, and there is no limit on term life insurance because it has no cash value. In North Carolina, the state also excludes the cash value of any life insurance if the face value of all policies is $10,000 or less.
One car or truck that is used as a primary source of transportation is exempt, and Medicaid does not count personal belongings and household effects. Wedding rings, engagement rings, and heirloom jewelry are not countable for Medicaid eligibility purposes.
Medicaid Estate Recovery
It is nice to know that you can qualify for Medicaid as a homeowner, but it is deceiving. Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away.
Because of the low asset limit, a home is the only valuable piece of property that could be part of an estate. If you die owning a home, Medicaid could put a lien on the property during the recovery phase — protecting the home requires a little planning.
Allowances for a Healthy Spouse
When a healthy spouse will still live independently after their spouse is in a nursing home, the independent spouse is allowed to keep half of the assets that are countable. This is formally called the Community Spouse Resource Allowance.
The maximum allowance in 2021 is $130,380, and the minimum is $26,076.
Income that is brought in by the Medicaid recipient must go toward the cost of the care that is being received, but there is an exception to the rule. A healthy spouse may receive some of that income in the form of a Monthly Maintenance Needs Allowance.
During the current calendar year, a healthy spouse can receive as much as $3259.50 a month, and the minimum allowance is $2155.
Spending Down and the Five-Year Look-Back Period
You can spend money, give gifts to your loved ones, or fund an irrevocable Medicaid trust to divest yourself of countable assets. If you go with the trust option, you can accept distributions of earnings that are generated by the principal until you apply for Medicaid.
It would be easy if you could transfer money out of your name right after you find out that you need long-term care, but there is a five-year look back period. You have to complete your divestitures at least five years before you apply for Medicaid coverage.
Your eligibility is usually delayed if you violate this rule. For example, in North Carolina, the state has determined that the average cost of nursing home care is $6810 a month. For every $6810 that you transfer, your eligibility would be delayed by one month.
We Are Here to Help!
All this can sound quite complicated, but we can gain an understanding of your situation and help you develop an efficient plan that covers all your bases.
If you are ready to get started, you can schedule an appointment at our Charlotte, North Carolina or Huntersville, North Carolina estate planning office if you call us at 704-944-3245.
The number for our Ashland, Kentucky location is 606-324-5516, and the number for our Florence, Kentucky location is 859-372-6655. You can also use our contact form if you would like to send us a message.