Assets You Can Have to Still Qualify for Medicaid

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Medicaid is health insurance that helps people who can't afford to pay for their medical expenses.

Many people feel that because they own a home or have some assets that they can't qualify for Medicaid help with their nursing home and doctor's bills. The truth is there are a variety of assets people can own and still qualify. It's just a matter of knowing the rules, and making a plan to meet those requirements.

Asset limits for those applying for Medicaid include:

  • Cash. You can possess $2,000 cash that will not be counted as an asset in determining your Medicaid eligibility.
  • Home. There is a $500,000 exclusion toward your home, meaning that if your home is valued at $500,000 or less at the time of your application, your home is excluded as an asset. Some states use the higher permitted exemption of $750,000.
  • Car. Up until recently, you could exclude only one car at a value of $4,500 or less, however that law has been changed. Now, one automobile of ANY current market value is excluded on your application.
  • Funeral and Burial Funds. If you have a pre-planned funeral or memorial arrangement, the entire value of that plan is excluded. If you do not, a separate bank account that contains $1,500 toward funeral expenses can be excluded. If you have pre-purchased burial plots, you can exclude not only the costs of the plot for the applicant, but for the entire family, and still be eligible for Medicaid.
  • Property. According to federal law, any real or personal property that is essential to self-support, regardless of value or rate of return, is excluded. That could include farms, rental properties and other real estate investments that generate income necessary for self-support. For rental income, however, the property must generate at least 6 percent of its value annually in order to qualify for the exclusion.
  • Life Insurance. Only the cash value of a life insurance policy owned by the applicant is counted, thus, all term policies are ignored.

There are so many other rules that can benefit those who aren't sure they'll have enough when the time comes. The key is to plan now and act now. These laws exist for your protection, and avoiding the discussion and the planning necessary to take care of the potential complications just because it is an unpleasant topic will only result in a more unpleasant conversation when you realize you're not ready when the worst happens. That can be a very expensive dilemma. Peace of mind right now, however, won't cost a dime, and could save you hundreds of thousands of dimes later.

K. Gabriel Heiser is an attorney with over 25 years of experience in elder law and estate planning. He is the author of "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets," an annually updated practical guide for the layperson.

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71 Comments

While these may be the rules in Attorney Heiser's state, they are NOT the asset rules in all states. Please consider adding a disclaimer that readers should NOT make legal/financial decisions based on this information and should consult with their own local elder law experts before moving assets or making financial plans. People should consult their local Area Agencies on Aging or other community agencies for referrals to qualified advisors.
I live in Texas and applied for DADS for my dad for home health care which is essentially Medacaid. He was turned down because of too much money in savings account. If we reapply after using some money to pay off house, will Medacaid be ok with this? Also how far do they go ban for banking statements?
MERP since it is under Medicaid is managed by the state. So each state will have a different spin on how they do MERP. Very much of this is in how your state handles the dead person's estate and how probate works in your state. So you kinda need to know how probate get's run.

My mom is in a NH in TX and on Medicaid and still has her modest home. I & another family member pay for all on the unoccupied house. Under TX law as long as they have any intent to return, then they can keep the house and be in compliance for Medicaid exempt asset rules for the home. Other states may not.

TX, like most states, has exemptions from MERP, like T-19 said. Also there is an exemption for all normal expenses paid on the house if it is vacant - I will be applying for this exemption and keep records of all items paid. TX has a very specific timeframe in which you have to file a notice to MERP of an exemption. I think this is done so that MERP has a couple of weeks to determine, if they will even file a MERP claim based on property value, comps DOM and if there seems to be exemptions or other issues that will run probate long or the property value is too low or an unlikely simple sale. If MERP declines to do a recovery, then you have to make sure MERP provides you a release of MERP's recovery.

Now TX is a level of claim state for probate. For a level of claim state, debts against the estate are paid in order of priority. MERP is a class 7 claim with all the other classes above being paid first and that includes fees paid to the executor & attorneys, as well as any property expenses, funeral costs. MERP cannot put a lien on the home, only a class level 7 claim in probate in TX. MERP still happens but rates are lower in TX and other states who have probate like this than in a state that has a equitable claim system. If you are in a state that allows for MERP to place a lien on the property, that is a different sort of legal process and MERP can be more demanding as they sit equal with all other debtors to get proceeds from the sale of the house. You need a release of liens in order to transfer or sell the property with a clear title, so you can see how this is a totally different dynamic.

Some states have it so that MERP is done by an outside contractor. IMHO they really need to get MERP claims or liens done and move on to the next one. TX uses HMS as does this for several states. Setting a value $ cut-off makes sense. A 150K house in probate is probably going to take as much time, notices, court hearings, etc as a 450K house. Which property would you choose to go after?

MERP came about in the early 2000's and the regulations done 2004-2005. Most states adopted them tweaked to their state law in 2005-2009. So most of the thought process on MERP was in the go-go years of the real estate boom when most thought that values would only go up and houses would have a less than a 2 month DOM. So much for that.

If MERP is in your future, you really need to find the regualtions on your state and then understand how probate works, so that you can make decisions in a timely manner to your best advantage.