You may receive income from mineral rights, not exactly a business as far as you are concerned but in some years a meaningful source of income. You may own a small part of a family business, whether one which is operating or one which has been created to hold rental property. You may own part of a family vacation home. Will these be counted in determining your eligibility for nursing home Medicaid?
Property is exempt if it is
(1) essential to your self-support and
(2) “used in a trade or business or nonbusiness income-producing activity.”¹
If continued operation of the family business or rental property is necessary for your support, you certainly do not want to give it up. In any event, no one in the family may be able to buy it or want to sell it to strangers. What will determine whether it is considered an active trade or business? The Social Security Program Operations Manual System (“POMS”) has some guidelines.
Does it really exist? Is the property in current use?
How would the business be described? What are its assets?
How many years has it been operating? Who are the owners?
What are its gross and net earnings, as shown by business tax returns?
If the family business or rental property passes this “smell test,” none of the liquid assets used in its operation will be considered countable income in determining your eligibility for nursing home Medicaid.
Valuing your mineral rights may be difficult. Finding a buyer for them may be more difficult. Maybe you do not have to do that. If you receive no more than $6,000 per year with a net annual return of at least 6%, your royalties or lease payments will not be included in your countable assets.
But what about the family vacation home? Will that disqualify you for nursing home Medicaid? Ordinarily, yes. You could put it up for sale within one year of applying and accept any offer for at least two-thirds of the offering price. But if you only own a part, you might be able to sell your interest to another family member. Gifting more than $200 would raise a red flag: you would be seen as having done that to try to qualify.
¹ 20 Code of Federal Regulations 416.1222
Elder law attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is an Approved Guardianship Attorney. She assists people in elder law, estate and special needs planning, guardianship and settling estates. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.