I addressed the differences between Medicare and Medicaid as well as introducing some basics of Medicaid Planning in my blog post earlier this week. Today, I want to talk about the biggest mistake I see for children making when helping a parent begin the process of qualifying for Medicaid: selling the parent’s house as part of a spend down to qualify for Medicaid. This is almost never necessary and is almost always a huge mistake. A house is almost always an uncountable asset, meaning it does not count against the asset thresholds applicable to Medicaid qualification which I talked about on Tuesday. Once sold though, the parent has cash, which is countable, and therefore must be spent before the parent can qualify for Medicaid. This is a devastating mistake.
How do perfectly intelligent and well-meaning people make such a big mistake. They make two of the biggest mistakes that can be made: (1) thinking it is easy (2) planning with the guidance of google and not first talking with an experienced attorney. Sometimes there is the third mistake of taking advise from a friend, family member, or hair dresser who, though well-intentioned, doesn’t know what they don’t know.
Unfortunately, there are numerous myths and misconceptions about Medicaid eligibility and benefits that can cause otherwise eligible seniors to fear being turned down for assistance. The belief that you cannot own a home and qualify for Medicaid is one of the biggest myths. It always breaks my heart when my first consultation with a prospective client regarding long-term-care begins with their disclosure that they have already sold the house. Let me give you the details of how this works.
Can I Own a Home and Still Be Eligible for Medicaid in North Carolina?
Because Medicaid is a “needs-based” program, applicants cannot have countable assets that exceeds the program limit. The asset, or countable resources, limit is where some seniors run into problems. As an individual applicant, you cannot own countable resources valued above $2,000. Fortunately, some assets are exempt from your countable resourcing when determining eligibility. In North Carolina, some common exempt assets include:
- One home up to an equity limit of $572,000 IF you are planning to return to the home OR a spouse, a child under 21, or a disabled person resides in it. The thing is, no one ever moved into a nursing home because they wanted to live there the rest of their lives. Thus, they are planning to return home, no matter how unlikely returning may be. The home is not a countable asset.
- One vehicle (no limit on value) – if two or more vehicles are owned, the most valuable vehicle is exempt.
- Life insurance policies if the cash value of all policies are under $10,000 (whole, universal, variable, etc.). Term life insurance policies have no face value so they are always exempt.
- Household furnishings, furniture, clothing, jewelry, and other personal effects.
As you can see, the average person will not be disqualified from Medicaid eligibility based on the home they own given the equity limit in North Carolina.
If your non-exempt assets do exceed the limit, your application will be denied and you will be required to “spend-down” those assets before Medicaid will approve your eligibility. In reality, this means you will have to use those assets to cover your LTC expenses until the value of your assets has decreased to the point where they meet the Medicaid eligibility guidelines. Furthermore, Medicaid’s five-year “look-back” rule prohibits you from transferring your non-exempt assets at the last minute in anticipation of the need to qualify for Medicaid. Assets transferred in violation of the look-back rule could cause you to incur a waiting period, once again leaving you to pay for your LTC bill out of pocket. The key, therefore, to protecting your assets and ensuring that you qualify for Medicaid is to include Medicaid planning in your comprehensive estate plan long before you find yourself facing the need for long-term care.
However, the planning process does not end with qualification. For example, in North Carolina, it is not uncommon for as to secure additional asset protection for the house with post-qualification planning. Ask us about this at Clarity Legal Group®.
Contact a North Carolina Medicaid Planning Attorney
If you have questions or concerns relating to the Medicaid eligibility guidelines or how to incorporate Medicaid planning into your estate plan, please contact a North Carolina Medicaid planning attorney at Clarity Legal Group® by calling us at 919-484-0012 or contact us online.
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