A common misconception that many clients have is that, while receiving long-term nursing home care, all of their assets must be spent down in order to qualify for Ohio Medicaid assistance.
In order to address the implications of long-term care, we must first discuss how one qualifies for Medicaid in Ohio. A person must qualify from three different perspectives:
• an income perspective
• an asset perspective
• a healthcare perspective
Specifically, there are three different types of Medicaid programs based upon the level of care.
• For an individual to qualify for Institutional Nursing Home Care, there is an income limit of $2,349 per month and $2,000 in assets.
• For an individual to qualify for Medicaid Waivers/Home and Community Based Services, there is an income limit of $2,349 per month and $2,000 in assets when help is required with at least two activities of daily living.
• Finally, to qualify for Medicaid with no level of care required, the income limit is $783 per month and the asset limit is $2,000.
The rules are different for married couples when one spouse is on Medicaid and the other spouse is remaining at home. We have addressed these differences in a separate article.
Does this mean you can only have $2,000 in assets and qualify for Medicaid? The quick answer is no. It means that you can only have $2,000 in non-exempt assets, but there are also exempt assets. The following is a general list of exempt assets which you can keep and still qualify for Medicaid:
• Equity in a Personal Residence of up to $572,000
• One Car
• Prepaid Funeral and Burial Costs
• Reasonable Tangible Personal Property
• $2,000 in Extra Assets
• $2,349 Per Month in Income
If you own more than this in assets and income, then you will not qualify for Medicaid.
Protecting Your Assets from Spend Down
Does this mean that if you must spend down all your assets before qualifying for Medicaid? The answer is both yes and no. It all depends on whether you engage in planning prior to long-term care becoming necessary.
A common strategy to protect your assets from spend down is to use an Irrevocable Medicaid Trust. This is a special type of trust where a trustee of your choosing will hold your title to your assets in this trust, and you remain the income beneficiary of the trust. You continue to receive the income from this trust if any of your investments receive income.
However, there is a special rule. You must establish the Irrevocable Medicaid Trust and fund it with your assets at least five years before applying for Medicaid. If you do not, then you will not qualify for Medicaid. In this situation, Medicaid will assess a penalty period in which you must pay for your own care before qualifying for Medicaid.
When I explain this to clients, they typically ask:
Well, what about families whose primary asset is their personal residence and a small amount of savings? Since we own mostly exempt assets, this type of planning seems unnecessary because we will qualify for Medicaid anyway.
Generally, this is correct. However, following the death of a Medicaid recipient and their spouse, the estate recovery rights of Ohio Medicaid will have a Medicaid lien against the estate. This gives Ohio Medicaid the right to recover the costs paid out during the person’s lifetime when he or she was accepting Medicaid benefits.
For example, let’s say John owned a home worth $350,000 and had approximately $25,000 in savings, in addition to his pension and social security. John goes into a nursing home and is a private pay patient for a few months while he spends down his $25,000 to $2,000. At this point, John qualifies for Medicaid. A few years later John passes away owing $115,000 to Medicaid. In John’s estate administration, his home must be sold to repay $115,000 to Medicaid.
As you can see, the failure to engage in proper Medicaid planning can lead to disastrous consequences. Before making any important legal decisions, it is always best to speak with a competent and knowledgeable estate and elder law attorney.
For more information
The attorneys at Aronoff, Rosen & Hunt, LPA are here to help you. Please contact our office at (513) 241-0400 or use our contact form to schedule a time to discuss this topic with one of our attorneys. The Estate Planning team at Aronoff, Rosen & Hunt, LPA look forward to speaking with you!