Qualifying for Medicaid Without Losing Everything You Have

Qualifying for Medicaid without losing everything you have is possible.

How do you qualify for Medicaid without losing everything you have in the process?

Hi, I’m Gary DeWitt the founder of DeWitt law.

I have good news and bad news. You usually can’t protect everything you have, but you can protect what you have.

Qualifying for Medicaid – What Makes it Work?

Qualifying for Medicaid requires one of two things to make it all work.

First, the person needing long term care must be mentally competent and able to sign the forms and move money around.

Or, Second, the spouse or family must have a durable power of attorney with sufficient power and language to let them sign the forms and move money around. If you don’t have a power of attorney or haven’t had it reviewed for Medicaid purposes, I highly recommend getting it done before you need to apply for long term care.

Brief History of Medicaid

Medicaid was created in 1965 to assist low-income people get long term care.

Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.

Income and Assets Overview

Qualifying for Medicaid has income and asset limits.

For Medicaid purposes, you have 2 kinds of assets.  First you have countable assets.  These are assets Medicaid is going to count against you. You also have non-countable assets which I’ll talk about.

First, everybody is allowed to have a home under Medicaid law. The equity in that house can be up to $603,000.00 in 2021. Thanks to some changes that happened in August of 2021, this equity can be preserved for the family in Arkansas.

Let me clarify. Everybody is allowed to have a home and all adjoining real estate if it’s worth less that $603,000.00. And adjoining means across the road too. But it doesn’t mean that you can have property in another state or another area of the state. That would count.

Second, a couple is allowed to keep up to $130,380.00 of cash on hand. I’ll come back to this in a minute. It’s not quite that simple.

The individual needing care can make up to $2,382.00 per month of gross income. The person that stays at home is allowed unlimited income.

The individual needing care can have $2,000.00 in their name.

An unmarried individual can have a home too. But they can only have $2,000.00 in their name.

Qualifying for Medicaid – Cash on Hand Limits

Let’s talk about the cash on hand limits. I said earlier that a couple, the spouse staying at home, can have $130,380.00 of cash or cash equivalents.  In Arkansas that includes checking, savings, retirement accounts, IRAs, 401(k), stocks, bonds, investment accounts, and more. This doesn’t mean you have to spend all your excess on nursing home care.

You can turn countable assets (cash) into non-countable assets. You can spend money to improve your home, pay down the mortgage, buy a new car, prepay a funeral, and much more. You can also turn cash on hand into an income stream. This is done with special financial planning.

The reason we talk so much about what you can spend money on and how much you can have is that Arkansas is a “half” state.

Half the Cash

That means that a couple can keep half their cash on hand up to the $130,380.00 limit.

For example, if you have $200,000 you can keep $100,000. If you have $260,760 or more, you keep $130,380.

Qualifying One Person in a Couple

Qualifying one person in a couple usually consists of coming up with a good spending plan and converting the excess cash into income for the spouse staying at home.

We arrange the accounts so the person at home name is on the accounts. We open an account for the person needing care just in their name and put $2,000 in it.

If the person needing care makes over $2,382.00 per month, then a special trust must be setup to hold the excess.  In the end, the money in that trust gets paid over to Medicaid.

Qualifying a Single Person

Qualifying a single person for Medicaid is harder than qualifying a person in a couple.

First, they can only have a total of $2,000.00 on hand. Their income is limited to $2,382.00 per month.

What to do if mom or dad has $100,000 in a retirement account?

The Penalty Period

Before I can explain how to handle this, I need to go over the penalty period.

If somebody gives away property within 5 years of applying for Medicaid, then that “gift” is penalized by the Medicaid rules. Technically the gift has to be made for the purpose of qualifying for Medicaid to be penalized.

The penalty is that the person must pay for their own care for a period of time until the penalty is used up.

So, if mom gave away $25,000 last year knowing she would need help and the “penalty” is $5,000 per month, then mom must pay for 5 months of care.

Qualifying for Medicaid by Giving Money Away

Medicaid has a penalty for giving money away.  But, what if we do it anyway, in a controlled way?

Can we give some money to the family, but pay for care during the penalty period?

I’m going to use $5,000 as the monthly penalty for easy math, but it is $5,871 per month in Arkansas.

Assume dad has $102,000 in the bank. He gets to keep $2,000 leaving $100,000.00 that must be dealt with before he can qualify.

What if he gave half to the family, and turned the other half into income payable to the nursing home?

So, $50,000 goes to the family.  This is going to result in a 10-month penalty period. That is $50,000 divided by $5,000 per month. But dad kept $50,000. However, that’s more than the $2,000 he is allowed. So, we take dad’s money and turn it into a stream of income paid to the nursing home for 10 months at $5,000 per month.

It’s not nearly as simple as that because income and other things must be factored into the calculations. I highly recommend seeking professional legal help that knows how to do the calculations.

Qualifying a Couple for Medicaid

Qualifying for Medicaid for a couple is about the same as qualifying an individual.

The only real difference is the couple can have $3,000 of cash.

Qualifying for Medicaid starts now!

You need to get comprehensive, complete durable powers of attorney done so that your family doesn’t have to worry about it later. You see, if you need long term care and can’t make decisions, you can’t sign a power of attorney and its too late to protect what you have.

You need to meet with an experienced estate planning and elder law attorney that knows what can be done now to get as many assets protected as possible from the ravaging costs of long-term care. They will guide you in what can be done to protect your assets.

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