The Basics of Medicaid: What You Can and Can’t Keep
In order to begin to understand Medicaid eligibility, you first need to understand how Medicaid will treat your assets.
When you apply for Medicaid (known as MO Healthnet in Missouri) benefits, the caseworker who reviews your application will separate your assets into two categories. The first category will be those assets which are “exempt”. Exempt assets are those that the applicant is permitted to retain and still become eligible for Medicaid.
The second category will be those assets which are classified as “non-exempt.” Non-exempt assets will be considered as available to you toward paying the cost of your care. The value of non-exempt assets will be counted as available to you and they will have to be “spent down,” or otherwise legally disposed of, before you will qualify for Medicaid long term care benefits.
While the laws in Illinois and Missouri differ in some respects, exempt assets are very similar in both states. In most instances the following assets are exempt:
- One’s home, no matter its value, as long as it is the principal place of residence for the applicant, his or her spouse, or a dependent child. Your home includes any surrounding property that is not separated from your home by someone else’s property.
- Household and personal belongings, such as furniture and appliances (if in use), clothing and personal effects, wedding and/or engagements rings (but not other jewelry).
- Tools of a trade or occupation, and farm supplies, livestock and similar items in some restricted instances.
- One automobile or truck per household in Missouri, unless special circumstances exist. In Illinois, for a single individual one automobile or truck, but it cannot be valued at more than $4,500.00 unless special circumstances exist. For a married couple, the spouse at home can also own an automobile or truck of unlimited value.
- A life insurance policy up to a very limited value (this is an instance in which Illinois and Missouri law differ). Term life insurance policies and group policies that have no cash surrender value are exempt.
- A prepaid funeral and burial plan, if irrevocable. But in Missouri, if the value of the prepaid funeral and burial plan is more than $1,500.00, then all life insurance cash value will be non-exempt.
- A burial space for the applicant, and in Missouri for each member of the applicant’s household, and in Illinois for each member of the applicant’s immediate family.
- A very limited amount of otherwise non-exempt assets, which most people choose to keep as money in a bank account. The applicant is allowed to keep resources up to a cash value of not greater than $999.00 in Missouri or $2,000.00 in Illinois. In the case of a married couple, the spouse at home will also be allowed to keep a certain amount of cash. The amount the spouse at home can keep is determined differently in Missouri and Illinois. See our newsletter on Medicaid Planning for Married Couples.
One important caveat: an asset that is exempt while you are alive may not be exempt after you pass away, unless proper planning has been undertaken. This includes especially the home. Moreover, if an exempt asset (such as the home) is sold during your lifetime, you no longer have that exempt asset. Instead, you have the non-exempt money from the sale of that asset. Another important caveat: just because an asset is considered exempt in determining eligibility at the time of application, that does not mean that its transfer is exempt from the “transfer penalties” that can substantially delay eligibility. Most particularly here, the fact that your home is an exempt asset does not mean that you are free to transfer its ownership to someone else.
Non-exempt “countable” assets that will be counted against you in determining eligibility for Medicaid include just about everything else that you own, such as checking accounts, savings accounts, certificates of deposit, money market accounts, stocks, mutual funds, bonds, IRAs, non-exempt life insurance policies, any real estate or any interest in real estate (such as a time share or oil and gas rights), second vehicles, boats, recreational vehicles, “luxury personal property” such as jewelry and furs, antiques, gun collections, and so on. While there are some minor exceptions to these rules, for the most part, all money and property, as well as any item that can be valued and turned into cash, is a countable asset.
While the Medicaid rules themselves are complicated and somewhat tricky, for a single person it is safe to say that you will qualify for Medicaid so long as you have only exempt assets plus a small amount of cash (i.e., less than $999.99 in Missouri and less than $2,000.00 in Illinois).
With proper advice from a qualified elder law attorney, you can learn how to best ensure that your exempt assets will remain that way after your death so you can pass them on to your heirs. You will also learn how best divest yourself of your non-exempt assets, minimizing losses in value and tax liabilities in the process, and protecting them from having to be spent down to pay for nursing home care to the greatest extent that the laws and your circumstances will permit, before applying for Medicaid long term care benefits. That process is known as “Medicaid eligibility planning,” and it is a process from which any senior facing the potential loss of his or her life savings to nursing home care costs will benefit greatly.