A common misconception among our elderly clients is that they need to spend down all of their assets to become eligible for long-term skilled nursing Medicaid. While that can help you qualify for Medicaid, it is far from a good — or the only possible — strategy. Instead of spending down your assets wastefully, a wiser way to approach the Medicaid spenddown is to convert them. Read on to learn how.
Countable vs. Non-Countable Assets
The first thing you should know is that, while long-term skilled nursing Medicaid has an asset limit of $2,000 ($3,000 for a married couple), this limit only applies to your countable assets.
Medicaid countable assets include cash, cash equivalents, retirement accounts, and other assets like stocks and bonds that you can liquidate to pay for your long-term care. Other countable assets include assets such as a second home or a second vehicle, and life insurance that has a cash value.
Non-countable assets that don’t affect Medicaid eligibility include:
- Your primary residence,
- One car,
- Pre-paid irrevocable burial and funeral plans,
- Household furnishings,
- Personal effects and clothing, and
- Other non-accessible property.
The Five-Year Lookback Rule
If your countable assets exceed the Medicaid asset limit, you should start exploring spenddown strategies. There are various tools at your disposal; however, one thing you should not do is make gifts, transfer items for less than fair market value, or make any uncompensated transfers. If you do so, you risk incurring a penalty period during which you will have to pay out of pocket for care.
Medicaid Spend Down Strategies
Instead of wastefully spending down your assets, a better Medicaid spenddown strategy is to transform countable into non-countable assets.
For example, let’s say you have $150,000 in countable assets. This amount of assets put you well over the asset limit and makes you ineligible for Medicaid; however, if you took $90,000 and spent it on necessary home improvements, spent $15,000 on an irrevocable funeral plan, and then used another $43,000 to buy a new car to replace your old one, you’d now be eligible for Medicaid.
This way, you can achieve Medicaid eligibility and cover your nursing home care costs and other qualifying medical expenses without wastefully spending down assets.
How We Can Help
Medicaid planning is complicated. In addition to spending down assets, there are other options such as placing your assets in a specific irrevocable trust that makes those assets uncountable, or purchasing a Medicaid compliant annuity. You should not attempt to go through this process on your own.
Our experienced Medicaid attorneys can analyze your financial situation and help you devise a comprehensive Medicaid planning strategy as part of your broader estate plan. We’ll advise you whether you meet the Medicaid asset and income limits and can suggest appropriate steps to preserve eligibility while safeguarding your assets.
Talk to a North Carolina Elder Law Attorney
Don’t waste your hard-earned money to achieve Medicaid eligibility. Our legal team at Brady Cobin Law Group, PLLC, can recommend the right Medicaid spenddown strategy for your needs. Call 919-782-3500 or contact us online to schedule your consultation.