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Does Every Married Couple have to Spend Their Assets to Qualify for Medicaid?

No. Many times the community spouse is allowed to keep more than $92,000 in assets, if the proper planning is utilized.

Medicaid law is complex and there is a great deal of confusion over the “division of assets” and the “Medicaid spend-down.” Everyone’s situation is different and the following example is just one of the ways in which many of our clients are able to qualify their spouse for Medicaid without spending down all their assets.

Harry’s* wife, Sally*, entered a Kansas nursing home. At that time, their assets were a home valued at $60,000, various cash and CDs totaling $85,000, and 160 acres of farm ground valued at $120,000. The home is an exempt asset owned by both Harry and Sally.

The initial determination was that Harry and Sally had $205,000 in non-exempt assets. Harry would be entitled to keep about $92,000 under SRS regulations. The remaining $113,000 would need to be “spent down” before Sally would qualify for Medicaid assistance. At $3420 a month (what Harry and Sally were paying at the rest home), it would take 33 months until Sally qualified.

However, Harry was living on his social security benefits, which amounted to $650 per month. Sally had social security benefits of $300 per month. The farm ground earned about $2400 per year, after expense.

After consultation with us, Harry was able to pull the value of the farm ground out of the division of assets requirement of SRS. Instead, it was set aside to Harry as his income in order to assist him with his minimum monthly allowance. In addition, Sally’s social security income was also given to Harry to improve his income. As a result, Harry’s income jumped from $650 a month, to $1150 per month (Harry’s income of $650, plus Sally’s of $300, plus $200 per month from the farm).

As an additional benefit, the value of the farm was no long considered a countable assets. Instead of $205,000 in non-exempt assets, the assets after deduction of the farm, totaled $85,000–one half of which Harry was entitled to keep as his assets.

Would the remaining $42,500 in Sally’s name have to go to the rest home? Not necessarily. In this case, Sally and Harry’s home needed new siding and a new roof. Neither Sally nor Harry had made arrangements for their funerals. Their car was old, and needed replaced.

The $42,500 in Sally’s name was used to repair Sally and Harry’s home. They bought a newer car and a life insurance policy with a face value of $1500. They prepaid their funeral arrangements, and prepaid their home, farm and personal property taxes. They then paid up the insurance on all their property for the next year. By the time they were through, the remaining non-exempt assets in Sally’s name were below $2000 (the maximum amount she is allowed to keep), they still had their home, farm ground, a newer vehicle, the big expenses for the next year were paid, the funeral expenses where paid, and they had a small life insurance policy. And Harry still had $42,500 in his name.

If Harry had taken the easy way out, sold the farm, then spent down the money, he would have had only $92,000 in assets and his home. By planning, he ended up with $142,500 in assets and his home, plus all the improvements that he and Sally put into place (repair of the home, newer car and so forth). Harry has saved over $50,000 and by keeping the farm, he increased his monthly income by $200. (*Harry and Sally* are not the real names of the clients, to protect their privacy. Numbers have been rounded to the nearest whole dollar.)


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