Medicaid and Community Spouse Assets

Most people know that in order to qualify for Medicaid coverage of a long-term stay in a nursing home, the nursing home resident cannot own more than $2,000 in cash or other "countable" assets. But if you're married, and one spouse is going into a nursing home and the other is remaining "in the community" (i.e., continuing to reside at home), how much can the so-called "Community Spouse" retain? That amount is determined by a combination of both federal and state Medicaid laws. (Note that for these purposes it doesn't matter whether assets are titled in the sole name of the nursing home spouse, the Community Spouse, or jointly in both names.)

The basic rule is that the Community Spouse can retain 50% of all of the countable assets of both spouses, based on what they own when the other spouse first enters the nursing home for a continuous period of at least 30 days.

Most of the states only permit the at-home spouse to protect one-half of the total amount of the couple's assets, up to $109,560, but with a minimum of $21,912. So if the couple's total assets are under $21,912, the Community Spouse can retain it all; if their total assets are between $21,912 and twice that amount (i.e., $43,824), the Community Spouse retains $21,912; if between $43,824 and $219,120, the Community Spouse retains half; and if over $219,120, the Community Spouse is limited to protecting $109,560.

Here are some additional examples:

Examples:

1. Assume a couple has total assets of $30,000. Half of that is $15,000, which is less than the "floor" amount, so the at-home spouse can protect $21,912; the balance must be "spent down" before the nursing home spouse can qualify for Medicaid.
2. If the couple's assets total $100,000, then the Community Spouse can protect the full 50% amount: $50,000.
3. If the couple's assets total $300,000, the Community Spouse's protected amount is limited to $109,560.

States following the above rule are known as "50% states." However, the most lenient states ("100% states") permit the at-home spouse to retain 100% of the couple's combined assets, but never more than $109,560. So if the couple's total assets are, say $150,000, the Community Spouse can protect not just 50% ($75,000) but $109,560. (The $109,560 figure changes annually, to keep up with inflation; this is the 2009 amount.)

In all states, once the Community Spouse's share is set aside, the nursing home spouse can keep up to $2,000 in cash, but the balance of the couple's assets must be eliminated somehow before the nursing home spouse can qualify for Medicaid.

So what do you do with the "excess" assets over the limits discussed above? The state Medicaid administration department will tell you that you must "spend down" the excess assets, and if it's a small amount, that's certainly the simplest way to qualify.

Another alternative is for the couple to simply give away the excess, but that will cause a period of disqualification from Medicaid eligibility for the nursing home spouse.

The couple could convert some or all of the excess from "countable" to "non-countable," e.g., buying a new car, improving the house, purchasing a Medicaid annuity, etc.

Finally, many of these options are quite technical and require the skills and advice of an experienced elder law attorney. Unless you're an attorney "in the trenches" on a daily basis, it's easy to miss a recent state Regulation or Agency Letter and make a mistake that will wind up costing you $1,000s!

K. Gabriel Heiser is an attorney with over 25 years experience in elder law and estate planning. Heiser is the author of “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets,” an annually updated practical guide for the layperson. For more information about this book, visit Medicaid Secrets.

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