Before Applying for Medicaid a Married Couple Should Consider a Revocable Trust
November 3, 2009
In the prior post, http://www.randallperla.com/blog/know-what-a-living-trust-can-do-for-you-and-what-it-cannot-do-for-you/ I discussed how a home, which is generally not a countable resource for Medicaid purposes, is countable when it is held in a Revocable Trust. I explained how such an arrangement can cause a single person to be ineligible for Medicaid and how it can work to a married couple’s advantage. I want to reiterate the advantage of a revocable trust to a married couple who is applying for Medicaid.
As stated previously, whereas a single person is only permitted to have $1,500 of countable resources, the spouse of the nursing home Medicaid applicant is permitted to keep half of the couple’s countable resources, up to $109,560. The advantage of a revocable trust can be seen in the following example:
John and Jane Smith are married and applying for long-term Medicaid for John. As part of the application process, the state looks at all of John and Jane’s assets. The couple has $50,000 in an IRA, $40,000 in bank accounts, $20,000 in mutual funds and a home valued at $250,000. The home is held in a Revocable Trust (aka a Living Trust).
Since the home is in a revocable trust it is not exempt and is a countable resource. Thus, the Smiths have $360,000 of total countable assets. However, a Community Spouse is only allowed to keep half of the total countable resources, up to $109,560. Thus, in this case, the Smiths will be able to keep $111,060 which is the maximum amount that Jane can keep as the Community Spouse ($109,560) plus the maximum amount that John can have as a Medicaid recipient ($1,500). The Smiths will have to spend down the remaining $248,940 to qualify.
However, instead of spending any of their money, the Smiths can simply move the home out of their Revocable Trust and deed it in John and/or Jane’s name. The home will then be considered an exempt resource and not countable for Medicaid eligibility purposes and the Smiths will be down to $110,000 in countable resources, under the maximum resource amount of $111,060. John Smith will have qualified for long-term Medicaid without him or his wife spending down a dime.
Alternately, if the Smiths had their home outside of a revocable trust, it would have cost them $53,500. The $250,000 home would have been exempt and not a countable resource. Thus, the Smiths would have had a total of $110,000 in countable resources. Jane would have been permitted to keep half that amount ($55,000) and John would have been able to keep $1,500, and the remaining funds ($53,500) would have had to be spent down to qualify.
Elizabeth L. Perla, Esq.
Law Offices of Randall M. Perla
Cleveland Medicaid Attorneys
19443 Lorain Road
Fairview Park, Ohio 44126
Phone (440) 333-2503
Fax (440) 333-9650
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1 Comment so farOne Response to “Before Applying for Medicaid a Married Couple Should Consider a Revocable Trust”
[...] However, if the couple employs planning techniques, they can often save additional assets and enable the healthy spouse to keep additional monthly income. Remember, giving assets away will result in a penalty period, and should not be done absent the advice and guidance of an elder law attorney. See http://www.randallperla.com/blog/why-do-i-need-to-plan-for-medicaid-ie-why-can%e2%80%99t-i-just-give-my-assets-to-my-children/ One planning technique that may be available to a married couple is the revocable trust. See http://www.randallperla.com/blog/before-applying-for-medicaid-a-married-couple-should-consider-a-rev... [...]