Spending Down Assets to Qualify for Medicaid

Medicaid has strict asset rules that compel many applicants to “spend down” their assets before they can qualify for coverage. It is important to know what you can spend your money on without endangering Medicaid eligibility.

In order to be eligible for Medicaid, applicants must have no more than $2,000 in “countable” assets (the dollar figure may be slightly more, depending on the state). In addition, Medicaid also has strict asset transfer rules. If an applicant transfers assets for less than market value, the applicant will be ineligible for Medicaid for a period of time. Applicants for Medicaid and their spouses may protect savings by spending them on non-countable assets.

A Medicaid applicant can spend down money on anything that would benefit the applicant. Following are examples of what a Medicaid applicant may be able to spend money on:

  • Prepay funeral expenses. A prepaid or pre-need funeral contract allows you to purchase funeral goods and services before you die.
  • Pay off a mortgage, car loan, or credit card debts. You can pay off the debt fully or make partial payment.
  • Make repairs to a home. Fix the roof, make the house handicapped accessible, buy new carpet, etc.
  • Replace an old automobile. This can be useful for the healthy spouse.
  • Update your personal effects. Buy household goods or personal comfort objects. Buy a new wardrobe, electronics, or furniture.
  • Medical care and equipment. Purchase items that aren't covered by Medicare or Medicaid. See a dentist or get your eyes checked if those items aren't covered by your insurance.
  • Pay for more care at home. Make sure you get any caregiving agreements in writing, especially if family members are providing the care.
  • Buy a new home. A home can be an exempt asset, so it may be possible to purchase a new home.

In the case of married couples, it is often important that any spend-down steps be taken only after the unhealthy spouse moves to a nursing home if this would affect the amount of money the community spouse would get to keep, called the community spouse's resource allowance.

Each state has different requirements for spend down. Before making any spend down plans, consult with your elder law attorney.

Avoid Sibling Disputes Over Caregiving By Putting It in Writing

Caring for an elderly parent can be stressful for families. Siblings may disagree over how to provide care or where a parent will live, and if these squabbles escalate into a guardianship battle, it can cost the family thousands of dollars. To avoid this, lawyers have begun drafting sibling agreements (also called family care agreements).

If a parent becomes incapacitated and can no longer take care of him- or herself, questions can come up between siblings over where a parent should live, who should manage the parent's money, or who will assume primary caregiving duties. A sibling agreement can address these issues and provide consequences if the agreement is not followed.

Sibling agreements are not meant to replace a trust or a power of attorney. Instead the agreement can complement these valuable estate planning tools by providing guidance for the trustee or the holder of the power of attorney. The following are some examples of topics an agreement might cover:

  • Which sibling has primary care of a parent and how caregiving duties will be divided among siblings
  • Whether a sibling will be reimbursed for caring for a parent
  • Where the parent should live — with a child, in assisted living, in a nursing home?
  • How to decide whether a parent should move into a nursing home
  • How the parent's money will be managed
  • Whether the siblings will contribute financially to the parent's care

If the siblings can't reach an agreement, a geriatric care manager or mediator can help draft the agreement. Mediators can also help if one of the siblings breaches the agreement. Consequences for breaching a sibling agreement could be losing a power of attorney or a reduction in inheritance.

To draft a sibling agreement, talk to your attorney.