Introduction
One should never hide assets from Medicaid. Purposely not disclosing asset information in order to gain Medicaid eligibility is illegal. It is fraud, and consequences for hiding assets can be severe, including jailtime and hefty fines. Furthermore, persons should not gift assets as a means to “hide” them and qualify for Medicaid. There is a 60-month Look-Back Period during which all asset transfers immediately prior to Medicaid long-term care application are scrutinized. Applicants who have gifted assets during the “look back” are penalized with a period of Medicaid ineligibility. Restructuring assets to become asset-eligible via Medicaid planning, however, is not considered hiding assets, nor is it illegal. Professional Medicaid Planners are aware of state-specific Medicaid laws and can help legally restructure assets for Medicaid eligibility while also preserving assets for loved ones as inheritance.
Medicaid’s Asset Limit
To qualify for long-term care Medicaid, an applicant must have limited assets. Generally speaking, in 2024, the asset limit for a single applicant is only $2,000. There are state-specific differences and some exceptions to the rule follow: California (no asset limit), New York ($31,175), Illinois ($17,500), Maine ($10,000), and Missouri ($5,909.25).
For married couples, the assets of both spouses are considered jointly owned and are counted towards Medicaid’s asset limit. The limit differs based on the Medicaid program for which one is applying and if one or both spouses are applicants. For Regular Medicaid, which for seniors is often called Aged, Blind and Disabled Medicaid, there is a couple asset limit, which is generally $3,000 (regardless of if one or both spouses are applicants). State-specific differences follow: California (no asset limit), New York ($42,312), Illinois ($17,500), Maine ($15,000), and Missouri ($11,818.45). For Nursing Home Medicaid or home and community based services via a Medicaid Waiver, if both spouses are applicants, the couple is generally limited to $3,000 or $4,000, but again, there are state-specific differences. When only one spouse is an applicant, the applicant is generally permitted up to $2,000 in assets, and their non-applicant spouse is permitted a larger allocation of the couple’s assets as a Community Spouse Resource Allowance (CSRA). In 2024, the maximum CSRA is $154,140.
Not all assets are considered “countable” assets and are calculated towards one’s Medicaid eligibility. Several assets are considered exempt and are not counted towards the limit. This usually includes one’s primary home, vehicle, personal belongings, household furnishings and appliances, and in some states, even one’s IRA.
Medicaid’s Look-Back Rule
As part of the Medicaid eligibility process, the Medicaid agency checks all asset transfers made by the applicant and their spouse within 60-months of applying for Nursing Home Medicaid or home and community based services via a Medicaid Waiver. This is the Look-Back Period and is intended to prevent gifting or “hiding” of assets to meet Medicaid’s asset limit, and hence, qualify for long-term care Medicaid. Outright gifts, as well as selling countable assets for under fair market value, is a violation of the Look-Back Rule. For example, if one were to sell their home valued at $500,000 to their adult child for $100,000, $400,000 would be considered a gift, and a violation of the Look-Back Rule, if done within 60-months of application. This results in a Penalty Period of Medicaid ineligibility and is calculated based on the amount of the “gift(s)”. Note that if assets were gifted more than 60-months prior to application, it is not in violation of the Look-Back Rule and there is no penalty.
Asset Protection Strategies
While persons with “excess” assets (countable assets over Medicaid’s limit) can “spend down” their extra assets on their long-term care, pay for home modifications for aging in place, purchase home appliances and furnishings, and pay off debt to meet Medicaid’s asset limit, there are also asset protection strategies available. These strategies are not illegal and can protect assets from Medicaid. The implementation of asset protection strategies must be done with an awareness of state-specific laws, and sometimes, prior to the Look-Back Period. Professional Medicaid Planners play a vital role in assisting Medicaid applicants in implementing asset protection strategies without jeopardizing Medicaid eligibility.
– Irrevocable Funeral Trusts (IFTs)
IFTs allow persons to prepay their funeral and burial expenses, eliminating the need for their family to cover these costs after their death. The trust must be irrevocable (it cannot be changed or revoked), and in approximately half of the states, a Goods and Services Statement is required. This is an itemized list of the items and services to be provided and the cost associated with each. The total must match the amount of the Irrevocable Funeral Trust. Some states limit the amount that can be put into the trust. For instance, in 2024, the following states have the following limits: Nebraska ($6,346), Illinois ($7,981), Arizona ($9,000), Oklahoma ($10,000), and Delaware ($15,000). While more than half of the states do not limit the amount that can be put into the trust, one should not put more in than their funeral and burial expenses should cost. IFTs can also be purchased for non-applicant spouses.
– Medicaid Asset Protection Trusts (MAPTs)
With MAPTs, one creates the trust, which must be irrevocable (cannot be altered or cancelled) and names both a trustee (a person other than their spouse) to manage it and a beneficiary. The trustee must adhere to strict rules, such as funds cannot be used on the person who created the trust. Assets placed in a MAPT are no longer counted towards Medicaid’s asset limit because the applicant no longer legally owns them. MAPTs can also protect one’s home, which is generally safe from Medicaid’s asset limit, from the Medicaid Estate Recovery Program (MERP). Via MERP, the state attempts to be reimbursed for long-term costs for which it paid for a deceased Medicaid beneficiary. MAPTs do, however, violate Medicaid’s Look-Back Rule, and therefore, need to be implemented prior to the 60-month “look back”.
– Long-Term Care (LTC) Partnership Programs
Via LTC Partnership Programs, a “partnership” is formed between a state’s Medicaid agency and a private long-term care insurance company. By purchasing a Qualified Long-Term Care Insurance Policy, meaning it is approved for the LTC Partnership Program, one has not only long-term care coverage, but also asset protection from Medicaid. Should one require Medicaid, for each dollar the insurance company paid out, a dollar is protected from Medicaid’s asset limit, as well as the state’s Medicaid Estate Recovery Program. For instance, if one’s policy paid out $200,000, a Medicaid applicant would have a $200,000 asset disregard. This is in addition to Medicaid asset limit, which is generally $2,000. So in this case, $202,000 would be preserved for the Medicaid applicant and their family. Long-Term Care Partnership Programs are available in most states.
– Medicaid-Compliant Annuities
By purchasing a Medicaid-Compliant Annuity from an insurance company, a lump sum of countable assets is converted into regular payments of income. The annuity generally must be irrevocable (cannot be changed or cancelled), immediate (payments must begin immediately), actuarially sound (cannot exceed the life expectancy of the person receiving the payments ), and fixed (payment amounts are the same). While single applicants can purchase Medicaid-Compliant Annuities, the income from the annuity will count as income. This could potentially push the applicant over Medicaid’s income limit. Often, annuities are a better option for married couples in which one spouse requires Nursing Home Medicaid or home and community based services via a Medicaid Waiver. In this case, the non-applicant spouse could receive income from the annuity and it will not count towards the applicant spouse’s income eligibility.
– Modern Half a Loaf
Via Modern Half a Loaf, approximately half of one’s “excess” assets are gifted, and with the remaining assets, a short-term Medicaid-Compliant Annuity is purchased. The income from the annuity allows one to pay for their long-term care during their Penalty Period of Medicaid ineligibility for violating Medicaid’s Look-Back Period. While this strategy may sound straightforward, the formula to calculate the amounts for gifting and annuity purchase is complicated. Nearly all states allow the Modern Half a Loaf. It is not advised for persons to implement this strategy without the assistance of a Professional Medicaid Planner.
What If an Asset Was Not Intentionally Hidden
If one submitted a Medicaid application, but forgot about an asset, such as a long-ago purchased life insurance policy, one should contact their state’s Medicaid agency right away to report it. Unfortunately, reporting a forgotten asset can result in Medicaid denial due to excess assets, but persons can reapply once they are below Medicaid’s asset limit. If one is a Medicaid beneficiary, they should also report any increase in countable assets, such as an inheritance. In fact, most states require that any change in income and / or assets be reported to the Medicaid agency within 10 business days.
Professional Medicaid Planners
Some of the asset protection strategies mentioned above are more complicated than others, and if done incorrectly, can result in Medicaid ineligibility. Professional Medicaid Planners are very experienced in assisting persons in rearranging assets to become asset-eligible while also preserving their assets for loved ones. Medicaid Planners are aware of state-specific rules related to these strategies, as well as state-specific rules related to Medicaid’s Look-Back Period and Penalty Period. Find a Professional Medicaid Planner to assist in preserving your assets.