Understanding Medicaid and Asset Protection for Spouses
As older adults require long-term care services, they and their families may turn to Medicaid, called ALTCS in Arizona, which is a financial program that helps cover the costs of such care. However, to qualify for Medicaid, you must meet certain eligibility criteria, including income and asset thresholds.
One question many spouses have when considering Medicaid is whether they will lose their home if their significant other needs Medicaid coverage. Find out more about the impact of Medicaid on your assets below, including whether or not you can keep your home. We’ll also touch on how estate planning lawyers can help you prepare for the costs of long-term care while protecting your assets with Medicaid planning.
Medicaid Eligibility Criteria and Spousal Resources
When an individual applies for Medicaid, they must meet specific financial requirements, including Medicaid income requirements. Both spouses’ assets and income are considered when determining eligibility.
A “snapshot” of the couple’s resources is taken when the applicant is admitted to a nursing home or another long-term care facility. If the couple has assets above and beyond Medicaid eligibility thresholds, those assets may have to be used to cover long-term care costs before Medicaid will begin covering costs. You cannot try to protect your assets by giving them away or making other changes after the fact to support eligibility (though a skilled Medicaid planning attorney may still be able to help protect assets).
For example, say a couple has $250,000 in cash savings in three savings accounts. Some of that money would have to be used to help cover the cost of long-term care before Medicaid coverage begins. You could not transfer $150,000 to your adult children once you realize long-term care is necessary to keep that money in the family.
The healthy spouse does get to keep a certain amount of the couple’s resources. The purpose of Medicaid eligibility guidelines is not to leave a healthy spouse bankrupt or without resources for living, including a home.
As of 2023, the spouse not applying for Medicaid is eligible to keep 50% of the couple’s assets up to a maximum of $148,620. The home’s value can also impact this figure, but there are exemptions for the house that we will discuss in the next section.
Exempt Assets and Home Protection
Homes are often exempt in these situations, which means they are usually not included in the calculations to determine Medicaid eligibility. Other types of assets can also be exempt. The spouse not applying for Medicaid can keep any of these exempt assets that he or she owns or owns jointly with the other spouse.
If the other spouse, minor children, or certain other dependents live in the home, it’s exempt. The home can also be protected by declaring an intent to return home. This is true even if there isn’t a good reason to believe that the spouse in question will be able to return home due to their medical condition or the outlook in the case.
Doctors and other medical providers don’t determine whether the person can or should invoke an intent to return home. Simply saying you have an intent to return home if and when you no longer require care protects a home for up to 12 months. That protection is in place whether or not your spouse or any other dependent continues to live in the home.
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 surviving spouse is still living in the home, Medicaid cannot do this.
Other Exempt Assets for Medicaid Eligibility Calculations
Apart from homes, there are other exempt assets that Medicaid does not count towards eligibility calculations. These include some life insurance policies, a car, prepaid funeral and burial expenses, and personal effects. You generally cannot exempt 401k and IRA plans in Arizona. Further, the payouts from these plans would be counted as income by Medicaid.
Personal effects won’t be considered by Medicaid at all, within reasonable limitations. No one is going to make a list of all the clothes in someone’s closet, attach value to them, and add that up to see if a clothing sale is in order. However, large or lavish items, such as fine jewelry, collectible art, or designer furniture, might be considered—especially if you purchased them just before you or your spouse applied for Medicaid or required long-term care.
The Medicaid Look-Back Period
Medicaid instituted a look-back period of 60 months to prevent people from giving away or transferring ownership of their assets to others to avoid having them used to cover long-term care expenses. For example, imagine a couple has three cars, and they have reason to believe that long-term care may be required in the future. Knowing that the healthy spouse would only be able to keep one of the cars as an exemption, the couple “sells” the other cars for $1 each to their adult children.
If Medicaid reviews the transfer of assets within the 60 months prior to application or long-term care needs and finds this type of transaction, it may take action. It could require that the assets be recovered and sold at fair market value. The resulting proceeds would then be used to help pay for care. Or, the incidents might result in a denial of Medicaid eligibility or a penalty period.
Medicaid/ALTCS Planning Options
An attorney skilled in Medicaid/ALTCS planning can provide many strategies to address some of the above concerns. Too many people learn that they have to be “broke” in order to qualify for Medicaid, and so they start selling assets and spending money without knowing about all of the planning strategies that are available to them.
Planning can be started years before long-term care is needed, which is ideal, but even in a crisis situation there are planning options that can help. While complicated, Medicaid planning can be exceptionally valuable to you and your family.
Plan for Long-Term Care With Professionals
Proactive long-term care plans can help you protect assets for your loved ones while ensuring you or your spouse have access to Medicaid if necessary. Reach out to the team at Israel & Gerity to make an appointment and find out how we can help you plan for the future.