Medicaid Part 3 - What is Countable for Division of Assets?

Last time we talked about a division of assets between a well spouse and an ill spouse.  It occurs so that the well spouse can keep some assets and determines how much the ill spouse needs to spend down to qualify for Medicaid.

Now, let’s talk about what resources are countable.  Some resources are countable and can be divided between the well spouse and the ill spouse. Some are not countable and do not have to be divided or counted. Even when we have a single person, some resources are countable and others are not countable. 

This is not meant to be exhaustive, but let’s talk about what is countable and what may not be countable.

A common example is farm ground or a business.  Typically, if you do nothing that property is going to have to be sold to pay for your care, with the proceeds divided (remember the well spouse can only keep one half of the countable property, not to exceed $160,000.)  But, you can make that property non-countable by, as an example, making it a good faith business enterprise that actually produces income.  That allows us to not have to sell or spend that asset, which also many times is going to save us from having to pay capital gains taxes.  That can be farm ground, but it can also be a business. 

The rules are quite strict about that, but it is certainly a way to preserve resources and avoid unnecessary taxation. 

This rule can apply in a married situation, but it can also apply for just a single person. 

There are other non-countable resources.  As an example, most IRAs of the well spouse are not countable.  That means when you do the division of assets you don’t have to add that asset in and the well spouse can keep that IRA, on top of the amount set aside under the division of assets. 

There are other non-countable assets.  Some assets are not countable because they are exempt, such as the home, your car, personal property, and a certain amount of life insurance, and a funeral plan. 

Sometimes you can convert countable resources into non-countable resources.  There are times when we can convert excess cash into an income stream for the well spouse to give the well spouse more income to survive on. It is a complicated rule, but we use it often.

If you recall our example from Part 2, Mr. and Mrs. Smith had $400,000 in countable assets; Mrs. Smith as the well spouse, would only be able to keep $160,000 as her maximum community spouse resource allowance.  Mr. Smith would have to spend his $240,000 down to $2000 to qualify for Medicaid.  But there is a way to covert that cash asset into an income stream for the benefit of Mrs. Smith using a special Medicaid qualified annuity.  Again, it is complicated with lots of rules but very beneficial to Mrs. Smith.  

Again, why are we talking about this?  We are trying to qualify the ill spouse for Medicaid, and the ill spouse can only have $2,000 in his or her name, plus some other exempt assets.

The amount the well spouse gets to keep is rather limited and so we are trying to maximize that as much as we can. 

Medicaid has its place. It can be wonderful relief for a family. But the rules are tricky. The rules are harsh. I rarely recommend going in alone.

If you would like a copy of my booklet “The Consumer's Guide to Medicaid Planning”, or if you need to schedule a consultation, give my office a call at 785-625-8040, go to our website (www.clinkscaleslaw.com) or email us at info@clinkscaleslaw.com.