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Medicaid planning is a topic that can generate considerable confusion. While Medicaid is a federal program, each state has its own set of rules for eligibility. Under the current Medicaid rules in North Carolina, an individual is not eligible for Medicaid until his or her total assets have been “spent down” to $2,000 or less.

What are the exceptions under this calculation? The most notable exclusion to the $2,000 limit is equity in the primary residence. An amount equal to $552,000* in equity may be excluded from the asset calculation. If the spouse or another dependent relative continues to reside in the home, it can be excluded from the asset calculation regardless of equity. One car may also be excluded, provided that vehicle is used to transport the individual to/from medical appointments. Household furnishings and personal property are generally not counted, and term life insurance is excluded (a portion of whole life policies may be excluded, but the remainder is countable). Retirement investments, including annuities and IRAs, are generally countable with some exceptions, depending on the date they were started, how they are titled, the individual’s life expectancy, who funded the account, and other factors.

Reducing overall assets to such a low amount can put a serious burden on a spouse or family member. While the value of equity in the home may sound like a lot of money, unless the house is sold or a loan taken against it, the money is not available to pay monthly living expenses, medical bills, etc. Planning ahead to protect a portion of assets may give you peace of mind knowing that your spouse or dependents will be cared for in your absence.

The law allows several options to protect more of the individual’s assets in a legal fashion. There are numerous exceptions and rules for each option, and those rules change frequently, so it is always a good idea to speak with an elder law attorney familiar with Medicaid planning. Here are some considerations that may ensure your spouse or dependent loved one will have sufficient income and support:

  1. The Community Spouse Resource Allowance (CSRA) permits a married couple to exclude one-half of the assets, up to a total of $119,220 (as of 2016 – this number may change each year), from the calculation. Added to the $2,000 minimum, the spouse who will remain in the home may keep $121,220 under the CSRA. The calculation of assets is done on what the government calls the “snapshot date.” This is the last day of the month prior to when the applicant was first hospitalized and/or transferred to a nursing home for a combined total of more than 30 days. (Note: the snapshot date may be months or years prior to the application for Medicaid.)
  2. In some cases, assets may be transferred into a trust for the benefit of the other spouse or dependents. Setting these trusts up well in advance is the best option. There is a transfer penalty that restricts Medicaid eligibility for a specific timeframe calculated on a standard formula. In general (and after November of 2012), asset transfers made more than 60 months prior to the application for Medicaid will not be reviewed. As always, there are exceptions to the transfer penalty.

Many states, including North Carolina, have started efforts to recover Medicaid dollars from the estate of the individual after his or her death (referred to as “estate recovery”). For annuities purchased after November 1, 2007, for example, the state of North Carolina must be named as primary remainder beneficiary upon death of the other spouse. The state may also make a claim against the equity in the home or other assets upon the death of the Medicaid recipient, though hardship exclusions apply here, as well.  There are steps that can be taken to try to protect money and property from a recovery claim, but many of these steps require action be taken in advance of a need for long term care.

Planning for long-term care and future Medicaid needs can be complex. If you have questions or concerns, we recommend you speak with an elder law attorney familiar with North Carolina Medicaid requirements. Contact us today to schedule an appointment in our Lexington or Greensboro offices.

*These numbers are as of the date of this article. Rules and limits change frequently.