Preserving Assets and Income If Your Spouse Applies for Medicaid

People sometimes think that if their spouse enters a nursing home that the nursing home or the government will take all their assets, leaving them in dire financial straits.  The truth, however, is that even if your spouse enters a nursing home and you need to apply for Medicaid coverage to pay for the cost, you can still retain significant assets and income. 

In Medicaid parlance, the spouse who stays out of the nursing home is referred to as the “Community Spouse” and the spouse who enters the nursing home is referred to as the “Institutionalized Spouse”.  Below is a set of questions and answers which will help explain what assets a Community Spouse will be able to keep if their spouse goes into a nursing home.

If my spouse applies for Medicaid for nursing home care, what assets can I keep?

Medicaid rules allow the Community Spouse to retain the following assets as “exempt resources”:

• $74,820.00 in monetary assets (and sometimes more),

• the family home,

• the tangible personal propertywithin the family home,

• irrevocable pre-paid funeral arrangements, and

• one car.

What happens if I have more assets than allowed?

You will need to “spend down” those assets private paying for nursing home costs, until you reach the allowable level.  However, there may be some alternatives.  For example, you could spend some of the excess resources on necessary home repairs because the home is an exempt asset.  For example, $5,000 in funds in excess of the allowable limit can be used to pay for a needed furnace replacement, instead of being spent down on nursing home costs.

Can I refuse to make my assets and income available to pay for the nursing home care of my spouse?

Yes, you can.  That is known as a spousal refusal.  If you file a spousal refusal, then the Medicaid authorities may seek to force you to provide the resources by litigating the matter in court.  If you file a spousal refusal, the Medicaid authorities must evaluate the eligibility of your spouse without considering your assets.

Is all tangible personal property exempt as a resource?

No, if you have items of specific intrinsic value, such as a coin collection or valuable pieces of art, they would potentially be considered non-exempt.

Do I have to contribute any of my income to the care of my spouse?

The Community Spouse is also entitled to $3,259.50 per month in income in 2021, which is known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).  If the Community Spouse does not have that amount in their own name, they are entitled to income from the Institutionalized Spouse to reach the $3,259.50 level. 

For example, if both spouses solely have as income Social Security and the Community Spouse receives $1,500 in Social Security and the Institutionalized Spouse receives $2,000 in Social Security, the Community Spouse is entitled to $1,759.50 of the Institutionalized Spouse’s $2,000 in Social Security in order to reach the $3,259.50 MMMNA level.  Certain deductions apply for expenses like Medicare premiums and private health insurance costs.

Are retirement accounts like IRAs considered assets?

Generally no, they are not.  They are considered instead as sources of income.  The income amount derived from them is based on the account owner’s age and is somewhat larger than the required minimum distribution (RMD) amount.  This is good news, however, because it means that a Community Spouse could have an IRA worth $100,000.00 and that money would not be counted towards the $74,820.00 in resources that they are allowed to have.

Given all these rules, are there planning opportunities?

If your spouse is entering a nursing home and applying for Medicaid, you do not need to be impoverished as a result.  The rules regarding income and asset exemptions are complex, but they yield many planning opportunities to maximize the preservation of assets and income for the Community Spouse.

Matthew J. Dorsey, Esq. is a Partner with O’Connell and Aronowitz, 1 Court St., Saratoga Springs. Over his 23 years of practice, he has focused in the areas of elder law, estate planning, and estate administration.  Mr. Dorsey can be reached at 518-584-5205, mdorsey@oalaw.com, and www.oalaw.com.