Medicaid is a jointly administered federal/state government health insurance program that does pay for long-term care. Medicare does not pay for living assistance, and as a result, many seniors will ultimately seek Medicaid eligibility.
Since Medicaid is a need-based program, you cannot qualify if you have significant assets in your name. Here in Michigan where we practice law, the limit on assets is just $2000.
Without question, this is a very low limit that would disqualify most seniors, but there are some assets that are not considered to be countable for Medicaid eligibility purposes. One vehicle that is used as a primary source of transportation is not counted, and personal belongings and household goods would not prevent you from qualifying.
Wedding and engagement rings are exempt, along with heirloom jewelry that you may have in your possession. Applicants can have up to $1500 in whole life insurance and the same amount set aside for final expenses. There is no limit on the amount of term life insurance that can be carried. This is because term life has no cash value.
Your biggest and most important non-countable asset is your place of residence. Your home is not considered to be a countable asset when Medicaid is determining your eligibility status, but there is an equity limit. In our state during the current calendar year, the limit is $585,000. If a healthy spouse is remaining in the home, there is no equity limit at all.
The fact that your house is not considered to be a countable asset is a good thing on the one hand, but you have to concern yourself with the matter of Medicaid recovery. Each state is required to seek recovery from the estates of deceased Medicaid recipients.
Since the non-countable assets aside from your place of residence are not very valuable in the big picture, the only piece of property that they could potentially go after is your home. We should point out the fact that if you have a healthy spouse still living in the home, there would be no recovery efforts.
If you are the only direct owner and you do not have a surviving spouse, it would be possible to give your home to your child before you submit your application for Medicaid coverage. However, there is a five-year look-back. If you give away assets within five years of applying for coverage, this would trigger a period of ineligibility.
The program would compare the amount that you gave away to the cost of long-term care in Michigan. According to the state, the average cost of long-term care in our state is about $100,000 month. Let’s say that you gave away $200,000 within the look back period. That would have been enough to pay for two years of care, so your eligibility would be delayed by 24 months.
When you digest these facts, you can see that you would want to give the home to your child at least five years before you apply for Medicaid.
There is an exception to the above rule. If you have a child who was living in the home with you as a caregiver for at least two years before you submitted your application for Medicaid coverage, you could transfer ownership of the home to your child without violating the five-year look-back. As a result, your child would be the owner when you pass away, so your personal cupboard would be bare when the Medicaid estate recovery process is initiated.
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