Does Texas Have a Medicaid Spend Down?

How Do I Spend Down Assets for Medicaid?

Most of us will require nursing home or other long-term care at some point in our lives. What’s worrying is how expensive it is. Medicare coverage for long-term care is very limited; private health insurance policies generally do not cover long-term care; and few people have private long-term care insurance policies. While overall costs vary, Texans needing nursing care will quickly find their financial resources depleted unless they qualify for Medicaid.

To be eligible for Medicaid, you cannot have assets greater than a certain limit, and only those with a low income and limited financial resources will qualify for coverage. According to the American Council on Aging, when you apply for Medicaid long-term care coverage in Texas as a single person, your non-exempt assets in 2022 cannot exceed $2,523. For couples, the limit is $5,046 — if both spouses are applying.

This is especially problematic in situations where there is a healthy spouse whose husband or wife needs long-term care. If the couple receives too much income to qualify for Medicaid, the remaining spouse worries that they will have to spend down all the assets they have for the spouse’s care—leaving the healthy spouse penniless.

It’s no wonder that many older adults look for the possibility of reducing assets before this time comes and wonder how to spend down assets in Texas to qualify for Medicaid.  There are ways that you can protect your income and arrange assets so they are not countable when Medicaid eligibility is determined. However, this needs to be done correctly or you will not only lose out on the possibility of qualifying for Medicaid, but be faced with possible penalties.

A consultation with an elder law attorney can help you determine the best way to handle your individual situation so you can qualify when the time comes.

Transferring Assets to Qualify for Medicaid

Avoid Penalties for Asset Transfers

Seniors who know that they will soon need care often divest themselves of cash, stocks, bonds, and real estate holdings. However, Texas has a “look back” period of five years during which it will examine what you did with your assets. When applying for Medicaid, you must disclose the amount of your assets and when you made the asset transfers. Medicaid can question any transfer within the look-back period. If you didn’t get something of at least equal value in return for a transfer, you’ll be ineligible for Medicaid and may receive a penalty.

The penalty period or ineligibility period for transferred assets is the date when the person applies for Medicaid – generally when the person enters a nursing home. If it is determined that you gave away assets, transferred assets to others, or sold them for less than fair market value in order to meet Medicaid’s asset limit during this period, you could be penalized. All money and property, and any item that can be valued and turned into cash, is a countable asset unless it is listed as exempt.

What Expenses Qualify for a Medicaid Spend Down?

What is Nursing Home Spend Down?

A nursing home spend down is a financial strategy used when your income is too high to qualify for Medicaid. To be accepted into the program, some of your income must be spent down to get it low enough to qualify for Medicaid.

To qualify for a Medicaid spend down in Texas, your monthly income limit must be less than the amount allowed at the time you apply. If you are over 65 and make more money but spend the excess on medical bills, you may still be eligible if you can prove that the extra funds went toward medical care health care costs such as . . .

  • Medical bills, past and current
  • Transportation services for medical care
  • Home improvements to help with medical care, like a chair-lift
  • Medical expenses, such as eyeglasses or a hearing aid
  • Medicines from a pharmacy.

You could also spend money on accrued debt, such as a mortgage, a vehicle or credit card balances.

Asset spend down – You would also have to spend down all eligible assets needed to be eligible to receive benefits. There are assets that you do have to keep, such as a house or a car, up to certain limits. These are also non-countable assets such as personal belongings, which you can keep.

What concerns many seniors is the idea of selling assets and using their life savings to pay for a nursing home until they finally qualify for Medicaid coverage, which leaves their loved ones without an inheritance. A Texas estate planning attorney can help you prevent that outcome by using appropriate Medicaid planning strategies.

Strategies for Transferring Assets to Qualify for Medicaid

There are several strategies for transferring assets so that you can qualify for Medicaid when the time comes.  These include:

Qualifying Income Trust: The Qualified Income Trust (QIT) is a special type of trust for seniors in need of long-term care whose income exceeds Medicaid caps. Also known as a Miller Trust, it allows you to legally divert income into the Trust, reducing the amount of your income that gets counted against Medicaid caps.

A QIT works by allowing you to deposit into the Trust the amount of your income that allows you to fall under the income eligibility limit. The Trust then directs how funds are disbursed each month, commonly for:

  • A small personal needs allowance
  • Medical expenses not reimbursed by Medicaid
  • Minimum Monthly Need Amounts (MMNA) to a spouse, if applicable
  • A nursing home co-payment.

The following is an example of how a QIT works:

Suppose you have income and Social Security benefits of $4,000 each month. The nursing home costs $7,000 monthly, so you are $3,000 short each month. Since your monthly income is higher than Medicaid limits, you would not normally qualify. By putting the excess income into a QIT, Medicaid will cover that $3,000 shortfall, thus allowing you to qualify for Medicaid.

QITs address only the income eligibility requirement for Medicaid, not assets, which need to be dealt with separately.

Addressing Assets to Qualify for a Medicaid Spend Down

How do I Spend Down Assets for Medicaid?

Your assets must be under a certain amount to qualify for Medicaid. Some assets are exempt, which means they do not count toward the asset limit. It’s critical to know which assets are counted and which are not.

Countable Assets

Countable (non-exempt) assets are counted toward the asset limit and are assets that are easily converted to cash. Countable assets include cash, bank accounts, vacation houses and property other than one’s primary residence, mutual funds, stocks, bonds, and certificates of deposit.

Non-Countable Assets

Non-countable (exempt) assets are not counted toward Medicaid’s asset limit. Exempt assets include one’s primary home, given that the Medicaid applicant or their spouse lives in it.

Other spend down items allowed by Medicaid in 2022 include accrued debt, medical devices, home modifications to improve access, vehicle repairs, life-care agreements, annuities, and irrevocable funeral trusts.

Other Ways to Manage Assets

There are a number of ways to manage assets outside of the QIT that you can use along with the QIT. For example, a Ladybird deed, allows you to transfer ownership of real estate upon the death of the owners and protect this asset from Medicaid recovery efforts. Your attorney can help you with this and other ways of managing assets.

Gifting: If you want to gradually transfer your wealth to loved ones, gifting prior to the five-year look-back period is an effective way to do it without affecting your Medicaid eligibility. You can gift up to $15,000 a year per heir without involving gift taxes.

Call a Texas Estate Planning Attorney About Medicaid Spend Down

Estate planning law frequently changes but working with an attorney will ensure that the Medicaid preparation strategies you use are legally valid, while meeting your wealth protection and distribution goals. Our team at the Amsberry Law Firm can help you ensure that your assets are properly spent down or transferred in ways that don’t harm your future eligibility for long-term care. Our firm serves the San Antonio area (Bexar County) and surrounding counties. To speak with our estate planning attorney, call us today at (210) 354-2244.

Attorney Russell Amsberry

Attorney Russell J.G. Amsberry

Attorney Russell J.G. Amsberry founded the Amsberry Law Firm in 1995 with the goal of providing clients with exceptional, focused representation on their issues. His success as a legal advocate has been reflected in the numerous professional honors he has received, such as speaking engagements and inclusion in Scene in SA magazine’s listing of the best lawyers in San Antonio, a Distinguished rating from Martindale-Hubble, and an amazing rating from Avvo. [ Attorney Bio ]

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Amsberry Law Firm

The Amsberry Law Firm, founded in 1995, has helped thousands of clients overcome their unique legal challenges.

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