Exempt and non-exempt Medicaid spend down items

When spending down your mom’s “excess” assets, there are things that she can and cannot “spend down” on, or said another way, spend the extra assets on. Medicaid has assets that are countable (non-exempt) and assets that are not countable (exempt) towards Medicaid’s asset limit. Examples of exempt assets are household furnishings, personal belongings, such as clothing, an automobile, prepaid funeral and burial expenses, sentimental items, such as engagement / wedding rings, life insurance with a combined face value of $1,500 (generally), and usually one’s primary home.

Other assets are counted towards the asset limit and these include assets that are liquid, or put differently, can easily be converted to cash. These are the things that your mom cannot purchase as a means to “spend down’ her excess assets. Examples include a vacation home, a collector’s piece of art, and expensive jewelry, such as a diamond necklace. On the other hand, there are many assets that she can purchase as a means to “spend down” her assets that are over Medicaid’s asset limit. These include adding a first floor bedroom, home modifications to improve safety and accessibility, vehicle repairs, medical devices that are not covered by insurance, paying off mortgage and credit card debt, and even taking a vacation.

There are also Medicaid planning strategies that can be beneficial in helping your mom “spend down” her assets and gain Medicaid eligibility. For instance, your mom can purchase an Irrevocable (cannot be canceled or changed) Funeral Trust or a Medicaid-Compliant Annuity (converting assets into an income stream). If your mom chooses to implement a Medicaid planning technique, it is strongly encouraged that she seek a Medicaid Planner for counsel, as incorrect implementation can result in a delay or denial of benefits. It is important to mention that Medicaid has a Look-Back Period of 60-months in most states. See state-specific Look-Back Rules. During the “look back”, which is the period immediately prior to the date of one’s long-term care Medicaid application, the Medicaid agency checks to ensure no assets were sold under market value or given away (this includes charitable donations) in order to meet the asset limit. Violating this rule results in a Penalty Period of Medicaid ineligibility. Therefore, it is very important that your mom be careful as to not violate this rule.