Medicaid Planning -
Exempt Assets and Countable Assets
To qualify for Medicaid, you must pass some fairly strict tests on the amount of assets you can keep.
To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets.
Exempt assets are those which Medicaid will not take into account (at least for the time being). In Georgia, the following are the primary exempt assets:
- Home Place. The applicant’s house and all adjoining land and all buildings on the property are excluded from resources if the equity value of the home is $500,000 or less;
- Household Goods. Including furniture, decorations, art, and appliances are excluded;
- Burial Exclusion. The applicant and his/her spouse can each have up to $10,000 designated for burial expenses. This can consist of a prepaid funeral contract with a funeral home or funds designated for burial in a bank account. The face value of life insurance is applied toward the burial exclusion amount first;
- Burial Space Items. Burial plots for the applicant and spouse are excluded as well as other items at the burial site. There is no dollar limit on the cost or value of the burial space items;
- Income Producing Property. Property which produces some income, such as a rental house or a farm is excluded with certain limitations. The applicant’s equity ownership in the property is limited to $6,000.00 and the property must yield at least 6% net per year of the amount being excluded as a resource. Also excluded, is property used by an active business and non-business property up to $6,000.00 in value, such as a tractor or fishing boat if used to produce goods for home consumption;
- Life Estate Interests. The applicant’s life estate interests are excluded;
- Life Insurance Policies. Term life insurance is excluded after the first $10,000 is applied to the burial exclusion amount for the applicant and his/her spouse. However, any amounts over $10,000 are subject to estate recovery. The cash value of whole life or other life insurance policies is counted as a resource after the face value has been applied to the burial exclusion or if the burial exclusion maximum has been reached with other assets;
- Loan, Promissory Note, Mortgage or Security Agreement. Loans, promissory notes,
mortgages and security agreements are countable resources to the applicant or spouse if they are the sellers or lenders. If the applicant or spouse is receiving regularly scheduled payments from the borrower, the interest portion of the payments received is considered income to the recipient; - Automobiles. One automobile is excluded regardless of value and whether or not it is in use. Note that junked or recreational vehicles are counted as resources;
- Personal Items. Personal items such as clothing, jewelry are excluded;
- Retirement Funds. Retirement funds such as IRA’s, 401k’s, and pensions are excludable resources if they are being distributed in regular payments that include a portion of principal;
- Non-marketable Assets. Assets are excluded while the applicant is making a bona fide effort to sell the asset. A bona fide effort may be evidenced by an advertisement in the newspaper, a listing with a real estate agent, or a FOR SALE sign on the property. The property must be listed for no more than its current value, and the applicant must accept an offer if it is at least 2/3 of the current value.
All other assets which are not exempt (i.e., not listed above) are countable. This includes checking accounts, savings accounts, CDs, money markets, stocks, mutual funds, bonds, and so on. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt.
While the Medicaid rules themselves are complicated and tricky, for a single person it’s safe to say that you will qualify for Medicaid so long as you have only exempt assets plus a small amount of cash ($2,000.00 in Georgia).
Some Common Questions:
I’ve added my kids’ names to our bank account. Do they still count?
Yes. The entire amount is counted unless you can prove that some or all of the money was contributed by the other person who is on the account. This rule applies to cash assets such as:
- Savings and checking accounts
- Credit union share and draft accounts
- Certificates of deposit
- U.S. Savings Bonds
Can’t I Just Give My Assets Away?
Many people wonder, can’t I give my assets away? The answer is, maybe but only if it’s done just right. The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. In Georgia, for example, every $4614.90 given away during the look back period prior to a Medicaid application creates a one month period of ineligibility. So even though the federal Gift Tax laws allow you to give away up to $13,000 per individual per year without gift tax consequences, those gifts could result in a period of ineligibility for Georgia Medicaid of almost three months. In addition, legislation enacted on February 8, 2006, has extended the look back period to five years and imposes other harsh new penalties for gifts made after February 8, 2006.
Giving under the new rules may be possible; however, it is critically important that you have the advice of an attorney well versed in these new rules.
Though some families do spend virtually all of their savings on nursing home care, Medicaid often does not require it. There are a number of strategies which can be used to protect family financial security.
Medicaid Planning For Married Couples
In Georgia, the at-home or community spouse is allowed to keep all countable assets up to about $109,560.00. The rest of the countable assets must be “spent down” except for $2000.00 or less which the Medicaid applicant spouse is allowed to retain and still qualify for Medicaid. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA).
Each state also establishes a monthly income floor for the at-home spouse. This is called the Minimum Monthly Maintenance Needs Allowance (MMMNA). This permits the community spouse to keep a minimum monthly income of up to $2,739.00.
If the community spouse does not have at least $2,739.00 in income, then he or she is allowed to take the income of the nursing home spouse in an amount large enough to reach the Minimum Monthly Maintenance Needs Allowance (i.e., up to $2,739.00). The nursing home spouse’s remaining income goes to the nursing home. This avoids the necessity (hopefully) for the at-home spouse to dip into savings each month, which would result in gradual impoverishment.
To illustrate, let’s assume the at-home spouse receives $800.00 per month in Social Security. Let’s also assume that her spouse who is a nursing home resident has an income of $2,000.00 per month from Social Security and his pension.
| $2,739.00 | MMMNA | |
| $800.00 | at home spouse’s income | |
| $1,939.00 | amount to be diverted to community spouse | |
In this case, the community spouse will receive $1,939.00 per month from the nursing home spouse’s Social Security and pension and the rest of the nursing home spouse’s income will then go to pay for the cost of his care. The nursing home spouse does get to keep a monthly personal needs allowance: a whopping $50!
Once again, this does not mean that there are not other planning alternatives which the couple can pursue.
Consider the following case studies.