Commonly Asked Questions About Medicaid
Is a married couple always required to spend down one-half or more of their assets before qualifying for Medicaid?
Answer: It’s frequently possible to qualify someone for Medicaid and protect the assets for the at-home spouse. Sometimes, this can actually be done without any spend down whatsoever. Other times, even if there are substantial assets, the amount which would have to be spent down may be turned into an income stream to protect those assets.
Medicaid planning is like tax planning. Congress has provided legal safe harbors that can save applicants and their families from the burden of having to spend everything on care.
Is it true that under current Medicaid laws, a single parent cannot make financial gifts to their children once they enter a nursing home?
Answer: No. In fact, a proper gifting program is a great Medicaid planning technique. At the time an applicant applies for Medicaid, the state will “look back” five years to see if any gifts have been made. Then any financial gifts or transfers for less than fair market value may cause a delay in an applicant’s eligibility. While the process is a complicated one, an elder law attorney can often help structure a program to protect assets through the use of proper gifting, transfers to caretaker children, transfers to a disabled child, and so on.
Is $15,000 per year the maximum an individual can give away if they are going to apply for Medicaid?
Answer: No. The $15,000 per year gift limit people ask about when discussing Medicaid Planning is a tax law figure and not relevant with respect to Medicaid asset transfer rules. The maximum monetary figure Medicaid applicants need to concern themselves with is the “penalty divisor” for their state. The penalty divisor is the state assessed average cost for nursing care for which the state assesses Medicaid penalties. The current divisor for Colorado is $8,758 per month.
A Medicaid applicant’s house is considered “exempt” under the Medicaid laws. Can an applicant give their house away without incurring penalties?
Answer: No. Any assets which are given away are considered gifts. If an applicant gives their house away, with minor exceptions, (such as qualified transfers to a caretaker child or disabled child) the state will assess a penalty based on the fair market value of the house at the time it was transferred.
There are a number of steps a Medicaid applicant can take to preserve their assets, ranging from gifting strategies to personal care contracts to the use of annuities to protect funds which need to be spent down by a married couple.
Please understand that the laws are constantly changing and the planning your neighbor did for their mother six months ago may not be proper for your mother today.
Consult a knowledgeable elder law attorney for advice.