Protecting a Non-Applicant Spouse’s Income, Assets & Home When Applying for Medicaid Long Term Care

Summary
Managing finances can be difficult when only one spouse in a married couple requires Medicaid Long Term Care. The spouse who needs the care must have limited financial resources to be eligible for Medicaid, but the non-applicant spouse still needs money to live in the community. Fortunately, Medicaid has “spousal impoverishment rules” to help couples in this situation. Plus, there are other strategies Medicaid beneficiaries and their families can use to maximize resources.

 

How to Protect and Allocate Income When Only One Spouse Applies for Medicaid

To be eligible for Medicaid Long Term Care, individuals have to be under an income limit – $2,829/month per person in most states for 2024 for Nursing Home Medicaid (covers care in a nursing home) and Home and Community Based Service Waivers (covers care in the home an other places in the community).

Nursing Home Home Medicaid beneficiaries must also surrender most of their income to the state to help pay for their nursing home care, with some exceptions. They can keep a small personal needs allowance (between $30 and $200/month, depending on the state) to pay for items Medicaid doesn’t cover like books, cell phones, haircuts, etc. They can also keep enough to pay for Medicare premiums. And, most importantly for this discussion, they are allowed to keep enough to give their non-applicant spouse a Monthly Maintenance Needs Allowance (MMNA) to prevent that spouse from living in financial hardship.

  Key terms: Knowing these terms will help you understand the Medicaid’s spousal impoverishment rules, including the Monthly Maintenance Needs Allowance:
Non-applicant spouse – the spouse in a married couple who is not applying for Medicaid, also known as the community spouse, the well spouse or the healthy spouse
Applicant spouse – the spouse in a married couple who is applying for Medicaid, also known as the institutionalized spouse.

If non-applicant spouses do not meet their state’s MMNA limit, the applicant/beneficiary spouse is allowed to transfer some or all of their income to the non-applicant spouse. As of July 1, 2024, the MMNA limit ranges between $2,555 and $3,853.50/month depending on the state and the couple’s financial situation and living expenses. Plus, the transferred assets don’t count toward the applicant/beneficiary spouse’s income limit.

Adding up the figures that impact the Monthly Maintenance Needs Allowance can be rather complicated. Any spouse who suspects this allowance should be increased for them should seek the counsel of a Medicaid expert like a Certified Medicaid Planner or an Elder Law Attorney to make sure they receive the full benefit to which they are entitled.

 

How to Protect and Allocate Assets When Only One Spouse Applies for Medicaid

Applicants must also meet an asset limit in order to be eligible for Medicaid Long Term Care. In most states in 2024, that asset limit is $2,000 for a single applicant. This means the applicant must have $2,000 or less in countable assets. Countable assets include bank accounts, retirement accounts, stocks, bonds, certificates of deposit, cash and any other assets that can be easily converted to cash. Non-countable assets can include a primary home, furniture, appliances, a primary vehicle, personal items like wedding rings and items that help the applicant live independently, like a motorized wheelchair.

The asset limit for a married applicant in most states is $3,000. Medicaid considers all assets of a married couple to be jointly owned. So, for a married couple with both spouses applying for Medicaid Long Term Care, all of their countable assets would be counted against their asset limit for both applicants.

However, when only one spouse in a married couple is applying for Medicaid Long Term Care, the non-applicant spouse is allowed to retain a significant portion of the couple’s assets (between $30,828 and $154,140 as of 2024 in most states) without making the applicant spouse ineligible. This is known as the Community Spouse Resource Allowance (CSRA). To learn more about the CSRA, click here.

If a couple’s assets exceed their state’s asset limit even after the Community Spouse Resource Allowance has been allocated, there are ways to spend or further re-allocate those assets within Medicaid’s rules that will help the applicant spouse gain eligibility and help the non-applicant spouse avoid financial hardship. Before discussing those ways, it should be clear that Medicaid’s “Look-Back Period” prevents applicants from simply giving away their assets to become eligible. Most states “look back” into the applicant’s financial records for the previous five years to make sure they have not given away assets or sold them at less than fair market value. To learn more about the “Look-Back Period,” click here.

Now, here are some methods that will help one spouse become Medicaid eligible, and prevent financial hardship for the non-applicant spouse, even if the couple’s assets exceed their state’s asset limit. Before attempting to use any of these strategies on your own, we recommend consulting with a professional like a Certified Medicaid Planner or an Elder Law Attorney.

Paying Off Debt
Couples can pay off their own debt (mortgages, credit cards, car loans, etc.) to reduce their assets in order to become eligible. This does not violate Medicaid rules, including the Look-Back Period. However, couples can not pay off debt for anyone else, including family members. This would violate the Look-Back Period.

Purchasing an Irrevocable Funeral Trust
Buying an Irrevocable Funeral Trust (IFT) is an allowed approach to reducing assets for Medicaid eligibility purposes, and it will reduce future expenses for the non-applicant spouse. In some states, couples can pre-pay as much as $25,000 for their IFT. The rules regarding IFTs and Medicaid eligibility are state-specific and complicated, so it’s recommended that one consult a Medicaid expert prior to purchasing any funeral related items.

Home Modifications & Improvements
Spending assets on home modifications does not violate Medicaid’s Look-Back Period, and it can have the dual benefit of reducing assets while making the home safer and more livable for an aging individual. For example, one can add a stair-lift, hand rails in the bathroom, a walk-in bathtub, a wheelchair ramp, etc.

Purchasing a Medicaid Compliant Annuity
Buying a Medicaid Compliant Annuity creates a stream of steady income for the non-applicant spouse while reducing the assets of the applicant spouse to help them gain eligibility. In short, the applicant purchases a Medicaid Compliant Annuity for the non-applicant spouse from an insurance company with a lump sum of money, which reduces their total assets. The insurance company then pays back the lump sum to the non-applicant spouse in monthly payments that are treated as income by Medicaid. Since the income of the non-applicant spouse doesn’t count toward the income limit, the eligibility of the applicant spouse will not be impacted by those payments.

 

How to Protect the Home When Only One Spouse Applies for Medicaid

When one spouse of a married couple moves to a nursing home and the community spouse continues to live in the home, the home will not count against the state’s Medicaid asset limit regardless of the home’s value.

If the spouse receiving Nursing Home Medicaid passes away in a nursing home, the community spouse can still keep the home. All states are required by law to try and collect reimbursement for Medicaid Long Term Care expenses after the Medicaid beneficiary’s death, but states are never allowed to force the sale of a home or try to collect reimbursement via the home in any way while the spouse of the Medicaid beneficiary is still living in the home. A few states may try and collect reimbursement via the home if the spouse moves out or after the spouse’s death, but even that is unusual.