Up to what value is a car exempt from Medicaid’s asset limit? Does this include classic cars and luxury cars?
Under federal regulations, one vehicle, which in some cases may include a classic car or a luxury car, is exempt from Medicaid’s asset limit regardless of value if specific criteria (covered below) are met. In the past, a vehicle was exempt only up to a value of $4,500, but this no longer holds true. However, some states may still limit the value of the car for asset exemption purposes. (To find out if your state has a value limitation, it is suggested that you contact your state’s Medicaid agency).
Let’s back up; There is an asset limit in order to qualify for long-term care Medicaid. In most states, this limit is $2,000. (To see state-by-state asset limits, click here). While this asset limit might sound relatively low, there are several higher valued assets that are often considered exempt, which means they are not counted, towards the asset limit. As mentioned previously, a vehicle is usually one of these exemptions.
As a general rule of thumb, in order for a vehicle to be exempt from Medicaid’s asset limit, the vehicle must be used for transportation, either by the Medicaid applicant or another household member, such as a non-applicant spouse. The applicant does not have to be the one driving the vehicle. In fact, the “driver” can be a hired person to transport the Medicaid applicant or someone else in the household. To be clear, if a vehicle is not used for transportation, it is not exempt.
If a Medicaid applicant has more than one vehicle, generally the more expensive one is determined to be exempt. However, some states allow a second vehicle as an exemption under certain conditions.
In Florida, one vehicle is exempt, regardless of the value, age, or model. This means that a Medicaid applicant can own a classic or luxury car that is quite pricey and it be exempt. Furthermore, Florida allows a second vehicle as an asset exemption if it is older than 7 years old. However, this vehicle cannot be a luxury car nor can it be a classic car that is 25 years old or older.
As another example of how vehicle exemption rules and value limits vary by state, in Indiana, there is no value limitation if the vehicle is used to transport the Medicaid applicant to / from medical care, work, or it is a modified vehicle that accommodates a disability. Another exception is if the vehicle is for a non-applicant spouse. If none of the above criteria is met, only $5,000 of the value of the car is exempt. (For state specific information, it is best for you to reach out to the Medicaid agency in the state in which you reside. Contact information by state is available here.)
Returning to the asset limit, when a Medicaid applicant has countable assets over the limit, “excess” assets must be spent down in order to meet the limit, and hence, qualify for Medicaid. (Remember, most states have a $2,000 asset limit. To see asset limits by state, click here.)
Essentially, “spending down” assets consists of turning non-exempt (countable) assets into exempt (non-countable) assets. This can be done a number of ways, such as paying off excess debt, making home safety and accessibility modifications, or purchasing an irrevocable funeral trust. Furthermore, because many states have no limitation on the value of an exempted vehicle, replacing an older car for a newer one and / or one that accommodates disabilities, such as being wheelchair accessible, is a good way to “spend down” countable assets.
Please note, this does not mean one should purchase an extremely expensive vehicle. This is because the Medicaid agency might consider the car an investment instead of a means of transportation, and unfortunately, if this were the case, the vehicle would not be exempt from Medicaid’s asset limit.
As a general rule, one must exercise caution when spending down assets. This is because Medicaid has a look-back period in which all past asset transfers for 60-months (30-months in California) immediately preceding the date of one’s Medicaid application are scrutinized. If it is discovered that an applicant (or even his / her wife) has given away assets or sold them for less than fair market value, it is a violation of the look-back rule. Unfortunately, the penalty is a period of Medicaid disqualification.