Exempt Assets under Medicaid

April 13, 2006

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Federal and state laws exempt certain assets in determining an individual's eligibility for Medicaid. In other words, ownership of these assets will not affect an individual's eligibility, and timing these transfers is not a factor.

Warning

The dollar amounts of many of the exemptions discussed below are changed each year. In addition, the amounts and types of exemptions may vary from state to state. Use these exemptions only as guidelines. Check with the social service agency in your state for your current exemptions.

A Medicaid applicant first would have to use all of his or her assets in excess of the exempt amounts to pay the costs of nursing home care before becoming eligible for Medicaid. The assets of a married couple are combined in determining eligibility, as an individual is legally liable for the nursing home costs incurred by his or her spouse. However, the exemptions for a married couple are accordingly larger than what are available for a single applicant.

Importantly, an applicant who believes he or she should have been granted larger exemptions is allowed to request a hearing to present his or her case. Generally, an applicant should immediately seek legal advice in this situation, as the law requires that a request for a hearing be filed promptly or otherwise be barred by law, meaning the applicant would not be able to challenge the assigned exemptions later.

The following assets are exempt:

$2,000 owned by the applicant
between $18,132 and $90,660, but only for a married couple where the applicant's spouse continues to live in the couple's home; these amounts are the minimum and maximum exemptions; the actual exemption is equal to one-half of the married couple's total assets, subject to the minimum and maximum amounts (this exemption is in addition to the $2,000 exemption for assets owned by the applicant)
a home, but only if the applicant is likely to return home or one of the following individuals continues to live in the home:
- the applicant's spouse
- a child under age 21
- a child over age 21 who is disabled
- a brother or sister who owns part of the house and has resided there for at least one year
essential household items (furniture, appliances, etc.)
personal effects (clothing, jewelry, etc.)
burial plots
burial funds of up to $1,500 each for a married couple, and up to $1,200 for a single applicant; for an irrevocable burial fund, these amounts are raised to $5,000 each for a married couple, and $2,500 for a single applicant
one motor vehicle up to $4,500, except a married applicant can keep one motor vehicle owned by either spouse, automatically, with no limit on the value; others can keep one motor vehicle, with no limit on value, only if the vehicle is used for any of the following reasons:
- transportation to and from employment
- transportation for medical treatment
- transportation of a handicapped person
cash surrender value of life insurance, only if the face value of all polices is less than $1,500 (an unlikely occurrence); note that term life insurance does not have a cash surrender value and is, therefore, completely exempt
the dollar amount of nursing home costs paid by a long-term-care insurance policy (This is a relatively new type of specialized insurance designed to pay nursing home costs, not to be confused with an ordinary health insurance policy or an insurance policy that pays for the gaps in Medicare, which do not pay for nursing home costs. While the premiums for long-term-care insurance can be substantial, so can the savings. For example, if an applicant had a policy that paid for $200,000 of nursing home costs, then when later applying for Medicaid after the policy ran out, $200,000 of the applicant's assets would be exempt. Long-term-care insurance policies vary significantly in their coverage and premiums. Therefore, it may be advisable to seek legal advice before purchasing such a policy.)

In addition, certain amounts of income are exempt under Medicaid. Beyond these exemptions, the timing of any asset transfers, whether to individuals or into a trust, will be scrutinized and could result in penalties or ineligibility for Medicaid.