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San Antonio Express-News
December 22, 2000

Options to Qualify for Medicaid

© 1989-2010, Paul Premack

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Dear Mr. Premack: My mother-in-law is 91 and in poor health. She is in a nursing home, and is being assisted by hospice. Her assets include her modest home (which is in need of repair), worth about $40,000, plus approximately $40,000 in savings. Her children plan to pay for her funeral in advance, out of her funds. They also want to set aside the maximum amount of cash allowed for other uses without jeopardizing her qualification for Medicaid assistance if she outlives her funds. We are considering investing some funds into the home to increase its value. What are our options? – J.B.

To qualify for Medicaid at some future date, a person must meet five strict standards set by law. Medicaid is based on federal law, but is administered by each state under state regulations. The regulations require that an applicant:

1. Be a citizen or legal resident alien;

2. Be 65 or older, blind or disabled;

3. Need skilled or intermediate level nursing care;

4. Have monthly income at or below $1536 (for year 2000; the limit will increase to $1590 on January 1, 2001); and

5. Have countable assets that do not exceed $2,000 in value. Other assets that are non-countable can exist, and include major items like her home, personal effects, an auto and limited funds for a funeral.

You do not mention her monthly income, so I will assume that it is well below the $1536 per month cut off. Also, at 91 she meets the age requirement, and being on hospice undoubtedly meets the level of care requirement. That leaves only her assets, and you have two options for dealing with them under the rules:

First, she can convert her assets from countable to non-countable. Your letter proposes two ideas that fit this concept: paying for her funeral and investing in her house.

Medicaid allows funds to be made non-countable in order to pay for a funeral. They allow three methods: 1) setting aside $1500 in a bank account earmarked for the funeral; 2) setting aside $1500 in life insurance death benefits; or 3) purchasing an irrevocable funeral plan from a mortuary. There is no limit on the amount of money that can be put into an irrevocable prepaid funeral. Of the three choices for funeral funding, this is both most realistic and shelters the most funds.

Investing in her house also converts cash into a non-countable resource (homestead). Medicaid regulations clearly allow her funds to be used to pay off any mortgage she may have, to repair the house, or to upgrade the house with new carpet, paint, appliances, even furniture. Eventually when she dies, her heirs get the house in its improved condition. The key here is to be sure that Medicaid knows she intends to return to the house if her health improves.

Second, she can give away some of her assets. Medicaid has strict rules on any transfer of funds. Essentially, for any gift exceeding $2555 in value, Medicaid will disqualify your mother-in-law for a one month period. If she gave away her $40,000 savings, she would be disqualified for 15 months. It may be beneficial for her to give away only part of her funds (causing a shorter disqualification period) while keeping the rest to pay for her care during the disqualification period. The impact of transfers must be considered in detail, and you should have an individual consult with your Elder Law attorney to calculate the specific amounts and timing that would be best for her.

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Disclaimer: This column answers a specific legal question offered by an individual in the South Texas area. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice that meets your individual needs. It may give you a solid basis for discussion with your own attorney. Also, please be aware that laws change. You should consult with your personal attorney before you take any action on this or any legal issue.

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