Introduction
Does owning a garden plot separate from one’s home impact their Medicaid eligibility? What if one has land with livestock solely for the purpose of feeding their own family? Or what about a boat used strictly to catch fish for personal consumption? Will these assets count towards Medicaid’s asset limit, potentially pushing one over the limit? Can one still qualify for Medicaid?
The simple answer is, “yes”, one can own assets used in a self-support activity, such as producing food to feed oneself and their family, and still be Medicaid-eligible. Certain factors, however, come into play, such as the property’s equity value (its current market value after deducting debt against it), if it is currently being used, and if not, why and when it is expected to be used again, in addition to state-specific rules. Since these assets are not used as part of a business, and therefore, are not producing income, only Medicaid’s asset limit is relevant to this discussion.
In Medicaid-speak, these “self-support” assets may be called “non-business property used to produce goods or services essential to self-support”, “non-business property used to produce goods or services essential to daily activities”, and “non-income producing self-support assets”. “Property” (assets) may include land, which can be used to grow produce or livestock to feed oneself, or timber lots to produce firewood to heat one’s home. Assets may also include those that are used to produce one’s food, such as a tractor for gardening or a fishing boat used for subsistence fishing, or in the case of producing firewood for one’s own warmth, wood splitters.
Medicaid’s Asset Limit
For long-term care Medicaid eligibility, a senior applicant must have limited assets. This is because in all states, with the exception of California, there is an asset limit. (CA eliminated their asset limit as of 1/1/24, and therefore, this article is not relevant for this state).
While the Medicaid asset limit is state-specific, generally speaking, it is $2,000 for a single applicant. For married couples, the asset limit varies depending on the specific Medicaid program for which one is applying and if one or both spouses are applicants. For seniors seeking Regular Medicaid, often called Aged, Blind and Disabled Medicaid, a couple is generally limited to $3,000 or $4,000 in assets, regardless of if one or both spouses are applying. For Nursing Home Medicaid and home and community based services via a Medicaid Waiver, the assets of both spouses are still limited. However, the applicant spouse can generally have up to $2,000, while the non-applicant spouse is allocated a much larger portion of the couple’s assets as a Community Spouse Resource Allowance (CSRA). In 2024, the CSRA may be as high as $154,140.
Many assets are not counted towards Medicaid’s asset limit. This generally includes one’s primary home, household furnishings and appliances, a vehicle, and personal items, such as clothing. Additionally, Medicaid will not count up to $6,000 in equity value of assets used to produce food to feed oneself and their family, given specific criteria is met.
Treatment of Assets Used to Produce Family Food
Medicaid will disregard (not count) up to $6,000 of an asset’s equity value if it is currently being used by the individual or their spouse to produce food for their own personal consumption. Recall that equity value is the fair market value of the property after subtracting any debt against it, such as a mortgage. To be clear, any equity value over $6,000 will count towards Medicaid’s asset limit.
Examples:
1) Hannah owns a small lot across the street from her house. She uses it to grow produce and has chickens supplying eggs for herself and her husband to eat. The lot is valued at $3,500. Since it is under $6,000, the entire lot is excluded from Medicaid’s asset limit.
2) Ralph has 3 acres of pasture land (valued at $6,500) on which he raises cows and goats to feed himself. Since it is valued at $6,500, $6,000 will be disregarded and will not count towards Medicaid’s asset limit. The remaining $500 will count towards Medicaid asset limit.
For asset exemption, the Medicaid agency may require a statement with the following information: 1) a description of the asset 2) how it is being used 3) an estimate of its current market value and any debt against it.
When the Asset is Not Being Used
An asset that is not currently being used in a self-support activity (i.e., producing food for oneself), may still be exempt from Medicaid’s asset limit. For exemption, it must have been previously used, but is not currently being used for reasons beyond one’s control (i.e., illness, injury), and it must be reasonably expected that use of the asset will resume within 12 months. One’s Medicaid agency may require a statement including the following information: 1) the date the asset was last used 2) why it is not currently being used 3) the date it is expected that use will resume.
This exemption period may be extended an additional 12 months if the reason the asset is not being used is due to a “disabling condition” (i.e., herniated disk, stroke, cancer). A statement from the individual with the following information may be required: 1) The nature of the condition 2) the date that one stopped using the asset 3) when one expects to continue using it.
If one does not plan to continue using an asset for a “self-support activity”, such as producing their own food, it will count towards Medicaid’s asset limit.
State-Specific Differences
Not all states treat these self-support assets in the same manner when it comes to determining Medicaid eligibility. While some state-specific differences are covered below, this is a complicated topic and there likely other differences that are not included.
– Exemption Amount
While most states allow up to $6,000 of an asset’s equity value to be exempt, some states, such as Missouri, does not limit the equity value of the asset. For instance, if one has a lot with an equity value of $8,000 that is used to grow fruits and vegetables for their personal consumption, the entire $8,000 is disregarded and not counted towards MO’s asset limit.
– Reasonable Expectation to Resume Use
Most states allow self-support assets that are not currently being used to remain exempt up to 12 months (24-months for “disabling conditions”) if it is reasonably expected one will use the asset again. Nebraska, however, does not set a time limit.
– Specific Medicaid Program
While most states do not specify where one can and cannot live for this exemption, Colorado does not allow persons who are applying for Nursing Home Medicaid to receive this exemption. In other words, if a nursing home applicant has this type of asset, it is counted towards Medicaid’s asset limit.
Medicaid Asset Planning Strategies
If one has self-support assets that push them over Medicaid’s asset limit, and hence, make them ineligible for Medicaid, it does not mean that they cannot still become asset-eligible. Below are some planning strategies available to assist one in meeting Medicaid’s asset limit.
– Sell the Asset and Spend Down the Money
One can sell the asset (i.e., lot or pasture land), or in some cases, a portion of it, and spend down the proceeds until one is at or below Medicaid’s asset limit. “Spending down” allows one to turn countable assets (i.e., cash) into non-countable ones. For instance, one can purchase an Irrevocable Funeral Trust, make home modifications (i.e., wheelchair ramps, stair lift) for safety and accessibility, do home repairs (i.e., fix a leaky roof), or pay for needed long-term care. It is vital that one not sell the asset under fair market value or gift proceeds from the sale. This violates Medicaid’s Look-Back Period, a period of 60-months immediately preceding long-term care Medicaid application. The penalty for violating the “look back” is a period of Medicaid ineligibility.
– Create a Medicaid Asset Protection Trust (MAPT)
MAPTs are irrevocable (cannot be changed or revoked) trusts in which assets are placed and protected from Medicaid’s asset limit, as well as Medicaid’s Estate Recovery Program (MERP). To create a MAPT, a trustee, who manages the trust funds, and a beneficiary, who will eventually inherit the funds, are named. The trustee must adhere to strict guidelines, such as not using any funds from the trust on the individual who created it. Since the assets within the trust are no longer considered owned by the individual, MAPTs are a violation of the Look-Back Period. Therefore, MAPTs need to be created well in advance of the need for long-term care.
– Seek the Guidance of a Medicaid Expert
Medicaid eligibility and the treatment of assets is complicated, particularly since there are state-specific rules and these rules can change. Medicaid Planners have a wealth of experience in this area, can help one to determine if assets will, or will not, count towards Medicaid’s asset limit, and can assist in implementing Medicaid planning strategies to help one meet Medicaid’s asset limit. Applying, or implementing a Medicaid planning strategy, without being fully aware of the rules can result in Medicaid ineligibility. Find a Professional Medicaid Planner.