Good to Know

Married clients could lose one-half or more of their jointly owned countable assets when a spouse applies for Medicaid Long-Term Care insurance (LTCi). Countable assets1 include cash, publicly traded investments and other assets. Today, we’ll focus on creating the awareness needed to potentially avoid the loss of countable assets.

But first, let’s understand the key players in this drama:

Community Spouse

Also referred to as the “healthy spouse,” this spouse can generally live independently without assistance.

Applicant Spouse

This spouse applies for Medicaid LTCi to cover in-home or nursing home long-term care services.

A serious, if not devastating, financial mistake can occur when the applicant spouse applies to Medicaid for LTCi coverage. Spouses without awareness of community spouse protections could needlessly spend down over one-half of jointly owned countable assets. An example follows:

Example of Unnecessary Spend Down

A couple has $100,000 in jointly owned countable assets and nothing in individually owned assets.

  • The standard Medicaid resource limits could lead an unaware couple to spend down as much $70,000 of joint countable assets in some states.
  • The spend-down could be executed in a number of ways, such as by paying down the mortgage on the couple’s home.2
  • The community spouse could generally keep the remaining $30,000 of countable assets.

Community Spouse Resource Allowance

What if it were possible for the community spouse to keep the entire $100,000 in countable assets from the example? One possibility is the Community Spouse Resource Allowance (CSRA). The CSRA is intended specifically to help the community spouse avoid impoverishment when the applicant spouse applies for Medicaid LTCi coverage.

For example, if the spouses in the example had NOT spent down the $70,000, the community spouse could have kept as much as the entire $100,0003 in countable assets under the CSRA. Similar rules can protect the community spouse from unnecessary loss of income from the Medicaid income limits as well.4

Disclaimer

Medicaid CSRA and other rules are complex and vary from state to state. No decisions should be made without advance consultation with an experienced, credentialed elder care specialist.

The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide financial advice to clients. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.

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  1. Married clients should be especially cautious before spending down assets or allocating income from the applicant spouse.
  2. Always consult an experienced elder care specialist to plan Medicaid applications in advance.

1In many states, an applicant’s countable assets are limited to $2,000.

2Paying off debt is exempt from the Medicaid look-back penalty.

3Regulations vary significantly from state to state and exceptions apply.

4Refer to Medicaid’s Minimum Monthly Maintenance Needs Allowance for more information.