What if you have excess non-exempt assets?
To meet the asset test it is often necessary to “spend down” excess non-exempt assets before applying for Medicaid. How can a single or married person “spend down” or make the excess non-exempt assets go away?
There are four methods:
1.Pay the bills for the Medicaid applicant, and the applicant’s spouse, if they are married,
2.Purchase exempt assets
4.List non-exempt assets for sale.
1. Pay the bills.
•Pay the regular bills for the Medicaid applicant (and their spouse.)
•Pay off the house mortgage or other loans.
•Enter into a written “service contract” that meets the Health and Welfare Regulation standards that allows the Medicaid Applicant (and their spouse) to pay designated family members at a market rate for their help.
•The family member is paid after the services are provided.
•he income is taxable to the family member.
•If there is no written contract, then the payment is a gift.
•Go on a nice trip and pay for 1 child to go along if you need a traveling companion to travel safely.
2. Purchase exempt assets
•Buy a more expensive home
•Remodel the home. Make the home handicap accessible.
•Buy a more expensive car
•Buy stuff: TV, mink coat, dining room set, computer, chair, bed and other household items.
•Prepay the funeral with an irrevocable funeral fund
•Pay for dental and eye care and hearing aids
•Purchase an Annuity that is paid out in equal monthly installments over the life of the single person or the life of the healthy spouse. Purchase the annuity from an insurance company that pays all the funds out in a time period that is less than the actuarial lifetime of the owner.
For a single person, name the State of Idaho as the beneficiary to be reimbursed for the Medicaid benefits paid on behalf of the Medicaid applicant.
For a married, healthy spouse, name the spouse first as the beneficiary and the State of Idaho as the contingent beneficiary to be reimbursed for the Medicaid benefits paid on behalf of the Medicaid applicant.
To my knowledge the first such annuity was approved by Health and Welfare in February 2010.
3. Make Gifts of assets
Understand there is a five (5) year “look back” for gifts. That means if you apply for Medicaid, Health and Welfare will “look back” to see if any gifts have been made during the five (5) years prior to applying for Medicaid.
If a gift was made within this five-year period the applicant will be assessed a penalty period. A penalty period means that even though a person meets all other tests to qualify for Medicaid, they must wait out the penalty period before they can reapply and qualify for Medicaid. The penalty period is calculated by dividing the amount of the gifts made in that 5-year period by $200 for a daily calculation. For example, a $13,000 gift will result in a 65-day penalty period. This means that the applicant must wait an additional 65 days before they can reapply for Medicaid.
One solution is to give back the gifted funds, and there will be no penalty period.
Another solution is make large gifts, and put them in an irrevocable trust to protect the assets, and retain sufficient funds to pay the bills for a least five years.
There is no penalty period if a home is gifted to:
•A child who has resided in the home for two years prior to the first time the Medicaid applicant went into a facility for 30 continuous days or more. The child’s care is expected to keep the parent out of a care facility for part of this time.
•A sibling who lived in the home for one (1) year and also has an ownership interest in the home.
•A disabled child.
4. List a non-exempt, real property or other illiquid asset for sale.
If the Medicaid applicant owns real property that is not a primary residence, this property can be listed for sale and will no longer be counted as a non-exempt asset.
Procedure for applying for Medicaid
Once the “spend down” is accomplished and the asset and other test requirements are met, then it is possible apply for Medicaid the next month.
The Medicaid rules are complex and change often. The information provided in this article is general information and not intended as legal advice. If you want to investigate whether you or a loved one may benefit and qualify for the Medicaid program to help assist pay for the cost of long-term care in the home, in an assisted living facility or in a long term nursing home (skilled nursing care) facility, it is recommended that you seek the advice of a Certified Elder Law Attorney or other professional.