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Understanding Basic Medicaid Planning with Non-Countable Assets and Countable Assets is crucial for qualifying for nursing home Medicaid.

Non-Countable Assets in Medicaid Planning

In qualifying for nursing home Medicaid, certain assets are always non-countable: the homestead, of any value if the spouse continues to live there or, in 2024, with an equity value up to $713,000 if there is no spouse as long as the applicant checks a box saying that he or she intends to return. Since no one plans to die in a nursing home, that is readily done. The contents of the home are exempt, if they are not art, antiques or collectibles held for resale. One car is exempt; two if one has been modified for a handicapped driver; three is needed for another household member to get to work. Property needed for self-support is exempt, even if held in an LLC. Term life insurance is exempt but whole or universal life insurance is exempt only up to a face value of $1,500. A similar limit is imposed on burial funds. But an irrevocable pre-need funeral policy is always exempt.

Countable Assets and Strategies for Medicaid Compliance

Other assets are countable. During life a jointly held bank account is fully available to every owner. Interests in business entities the shares in which are not publicly traded could, in theory, be restricted by the operating agreement, though, as with such restrictions generally, this results only in delay. It may be helpful if the person has a short life expectancy and payment cannot be made to his spouse or estate.

Converting Countable Assets to Non-Countable Assets

Some countable assets can be made non-countable, permanently or at least temporarily. Assets can be converted to income using a Medicaid-compliant annuity. To be Medicaid-compliant, an annuity must be immediate, irrevocable, non-assignable and actuarially sound with fixed payments for no longer than the applicant’s expected lifetime and must name the state(s) administering the Medicaid program as the primary beneficiary or secondary beneficiary after the spouse.

Non-homestead real estate is countable and must be placed for sale. But it may not sell. If it does not sell by the applicant’s death, title on it, like any other real estate, including Texas mineral interests, can pass free of probate and free of Medicaid estate recovery via a Transfer on Death or Lady Bird Deed, neither of which is viewed as either a lifetime gift nor as part of the probate estate.

An interest in real estate held jointly with a non-spouse must also be offered for sale, but depending on the nature of the property may require the expense and time of a partition suit to become a profitable investment, making it even less likely to sell.

Siblings inheriting undivided interests in real property may convey their interests, on death, to a family trust using a Transfer on Death or Lady Bird Deed, making each sibling’s life estate unattractive to a potential purchaser.

Evaluating the Best Approach Based on Individual Circumstances

The approach or combination of approaches to be used depends on the monthly income of the applicant and applicant’s spouse as well as on the value and nature of the assets and how they are hold. Current Texas practice, which may change at any time, is to treat a retirement plan in payout status as income. A retirement plan not in payout status may be converted to a Medicaid-compliant annuity within a traditional IRA.

 

Elder law attorney, Terry Garrett, CELA, 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.

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