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This would be best answered by an attorney as state laws can enter in. However, if the couple has few assets, and Medicaid gets involved to pay for the care of the person in the nursing home, they have a formula that lets the spouse keep the house and a car plus a certain part of their income. If there is quite a lot of money involved, and estate attorney or an elder law attorney should be consulted.
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What you will be dealing with is how your parents state deals with "community spouse allowance". Medicaid is a federal/state needs based entitlement program (and very different than how Medicare & SS are done as they are federally structured entitlement programs).Medicaid is very interdependent of your state's laws as it deals with community property, spouse support and probate.

Carol is spot-on in recommending a elder care attorney. If there is any degree of property or income or assets, it kinda is critical that it be done accurately.

NH (aka skilled nursing facility/SNF or long term care/LTC) is paid for 3 ways: 1) private pay by either the elder or their family; 2) from LTC insurance; or 3) by qualifying for Medicaid.

For NH Medicaid eligibility, an INDIVIDUAL must show that:
1) are 65+,
2) medical condition requires that level of Nursing care,
3) monthly income is less than their states max (about $2,020.00),
This is the “income test” – how much $ do you make.
4) countable assets are less than $2K
This is the “asset test” – how much $ do you own.
5) not gifted away anything of value during the look-back period.

The eligibility $$$ are different if there is a "community spouse" who is NOT going into a NH. For couple's, Day 1 of "institutionalization" is the key date for finances, this is known as the "snapshot" day.If your parents have assets they are expected to do private pay @ the NH or "spend down" assets to get to their state's asset ceiling to be Medicaid covered.

Most states have the max monthly total asset of about 2K for individuals. For couples it's different. Your mom would be considered a "community spouse" as such the asset ceiling is higher and is limited to one half of the couple's joint assets. In some state's it's up to $109,560 (in 2011) max & $ 21,912 minimum in "countable" assets. In other states it's lower.

All assets are counted against these limits unless the assets fall within the short list of "noncountable" assets: personal possessions, 1 vehicle (regardless of value, as long as it is used for transportation of the applicant or spouse), their principal residence, provided it is in the same state in which the individual is applying for coverage & the house may be kept with no equity limit if the Medicaid applicant's "community spouse" lives there; prepaid funeral plans and a small amount of life insurance. Over that they must “spend down”.

“Spend down” – means get assets (excluding homestead, etc.) under the state’s Medicaid asset ceiling. If they have a home, prepay for utilities, cable, insurance, repairs. If your mom as the "community spouse" is planning on staying at the house, spending down by doing major repairs or paying off the mortgage, is often a super good plan and can bring their income down to the allowed ceiling.

For "community spouse's" there's other issues, like how to deal with income if she still works OR if she has/could have an inheritance OR her own investments OR if she never worked and her only income is his SS &/or retirement and she need's to get a MMMNA - minimum monthly maintenance needs allowance. (Say that 3 times fast!) These are all sticky, you'll likely need someone to work with you in figuring that out like an elder care attorney. The MMMNA is based on your state's AVERAGE and seem to be on the low side and often the community spouse will have to do an appeal to the state for more MMMNA or actually get a court order for spousal support to get more monthly support. I have know of spouses' who had MMMNA which didn't even cover their monthly bills & mortgage, so proper planning is kinda super important.

The critical day is DAY 1 of institutionalization so whatever you do needs to get moved, changed, spent before that. Good Luck!

Oh for couples the 2nd car is often a glitch. Medicaid allows for 1 car and often they give/gift the extra car to one of the kids. That gift can result in a transfer penalty under Medicaid laws. If mom is younger or healthy, it often is better to trade in both cars and get a newer single car (a car are exempt from assets)
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How are assets divided if one spouse needs Alzheimer's care
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