Medicaid law is complex and there is a great deal of confusion over the “division of assets” and the “Medicaid spend-down.” Everyone’s situation is different and this article provides an example of just one of the ways in which many of our clients are able to qualify their spouse for Medicaid without spending down. After the example, basic Medicaid rules are discussed.
Case Example: Division of Assets
Bonnie’s husband has advanced Alzheimer’s and must go into a nursing home. She’s afraid that their entire life savings will be gone in a year if she has to pay the nursing home $7,000 per month, and that she won’t be able to pay her monthly bills.
The couple has $115,000 in savings, a house and a car. His social security check is $1,842, and her social security check is $942. The house and car are exempt. Without a court order, the state will total all of the countable assets and Bonnie would only be able to keep one-half, or $57,500. Also, she would only be able to keep $1,891.50 (2013 figure) per month income.
There is good news for Bonnie. It’s possible she will get to keep everything — all of the assets, all of the income and the house — and still have Medicaid pay her husband’s nursing home costs.
Nevada law allows her to seek an increase in the amount of assets and income she can keep. Bonnie will need to petition the court to increase the assets and income, with what is called a Petition to Divide the Assets and Income and for Support. The Court can then set aside to Alice the new increased maximums for 2013: assets of up to $109,540, and income of up to $2,898 per month.
With proper advice, she’ll be able to avoid the spend-down and keep everything she and her husband have worked so hard for.
Nevada Medicaid Numbers 2013
|Minimum Monthly Maintenance Needs Allowance (as of 07/01/12)||
|Maximum Monthly Maintenance Needs Allowance||
|Minimum Community Spouse Resource Allowance||
|Maximum Community Spouse Resource Allowance||
- Up to $2,000.00.
- Home, up to $536,000.00 in equity, unless spouse or disabled child resides in home. The home must be the principal place of residence.
- Personal belongings and household goods.
- One car or truck.
- Burial spaces and certain related items for applicant and spouse.
- Up to $1,500.00 designated as a burial fund for applicant and spouse.
- Value of life insurance if face value is $1,500.00 or less. If the face value exceeds $1,500.00, the cash surrender value in these policies is countable.
Other assets are generally non-exempt, and are countable.
If the applicant’s gross income is over the income cap ($2,130.00) (2013 figure), he or she is not eligible for Medicaid, unless an income reduction trust (“IRT”) is created. Applicants over the income cap may consider applying for Clark County Long Term Care benefits. For married applicants over the income cap, it is often best to obtain an IRT and apply for Medicaid. The at-home spouse can keep more income and assets with a court-ordered division of assets followed by a Medicaid application.
Asset and Income Rules – Single
A single applicant will qualify for Medicaid as long as he or she has only exempt assets. The income must not be over the income cap, otherwise an income reduction trust is needed. Once eligible, the income of a single applicant will go to the facility as “patient liability” less a $35.00 per month personal needs allowance.
Asset and Income Rules – Married
The at-home spouse can keep exempt assets, plus a certain amount of countable assets called the Community Spouse Resource Allowance (“CSRA”). Without a court order, the CSRA is the greater of: (i) one-half of all countable assets up to the maximum CSRA or (ii) the minimum CSRA.
The applicant’s income cannot be over the income cap. Medicaid will also add both spouses’ income and divide by two to determine if the applicant is over the income cap. If over the income cap, an income reduction trust is needed. Once eligible, the at-home spouse can keep all of his or her income and none of it must be used for the care of the spouse. If the at-home spouse’s gross monthly income is less than $1,891.50, then a portion of the institutionalized spouse’s income is given to the at-home spouse up to a total of $1,891.50. This amount can be increased by Court Order to $2,898.00.
The law allows a married person to take planning steps to increase the amount of income and assets he or she can keep when the spouse is facing a nursing home stay. This planning allows the spouse great financial benefit and peace of mind. This is often accomplished with a court-ordered division of assets. With a division of assets, the Court may increase the CSRA to a sum in excess of one-half of the resources. In addition, the monthly income of the at-home spouse can be increased. Without proper legal advice, many people spend more money than they have to spend.
“Spend down” refers to the process of reducing countable assets to the eligibility level. Some examples are paying off a mortgage, purchasing a better car, or arranging burial. For a married couple, the timing of the spend down may be critical.
The entire amount in the bank account is considered as if it belongs to the applicant, unless you can prove that some or all of the money was contributed by the other person who is on the account.
Gifting of Assets
All gifts made on or after February 8, 2006 are subject to a 5-year look-back period. Gifts made outside the 5-year look-back period create no disqualification period. If gifts were made in the 5-year look-back period, Medicaid will not pay for nursing home care during the disqualification period.
The disqualification period is calculated by taking the value of the asset transferred and dividing by the penalty divisor. For example, if the applicant transfers $72,000.00, that is divided by $7,200.00, and results in a 10-month period of ineligibility. Transfers of less than $7,200.00 will create a partial month of ineligibility. The disqualification period begins to run when the applicant moves to the nursing home and is otherwise eligible for Medicaid except for the gift.
Adding a child’s name to the deed on real property is considered a gift and it creates a disqualification period. There are some exceptions to the gifting rules, such as gifts to a disabled person. Another exception is when a child who was residing in the home for at least two years before the date the individual becomes institutionalized and who provided care to the individual which permitted the individual to reside at home rather than in an institution, as determined by the State.
Upon the death of the Medicaid recipient, Nevada liens the home up to the extent of benefits paid. Medicaid must lift the lien from the surviving spouse’s home for any bona fide purpose, such as selling the house, refinancing the house, taking a home equity loan or reverse mortgage. For example, if the surviving spouse sells the home after the nursing-home spouse dies, Medicaid must lift the lien and the surviving spouse is entitled to keep the entire proceeds without paying the lien.
Information provided as a service of Kim Boyer, Certified Elder Law Attorney, updated as of 01/01/13. It does not constitute legal advice. For specific questions you should consult a qualified attorney.