If you hope to qualify for Medicaid in the next couple of years, you must be able to show that your income and asset limits do not exceed a specified amount. Though the amount varies from state to state, it is generally very low, with most states limiting single elderly applicants to just $2,000 in countable assets.
If you are like most aspiring Medicaid applicants, your countable assets far exceed the $2,000 threshold. Fortunately, and according to the American Council on Aging, you can become eligible by “spending down” your assets and income to the point where you qualify. However, before you begin the spend-down process, there are two rules with which you must familiarize yourself: the lookback period rule and the rules regarding proper ways to spend down items.
The Medicaid lookback period
The Medicaid lookback period, which is 60 months in most states, including Indiana, is a period in which Medicaid checks to see if you gifted, sold or transferred any assets. The clock starts ticking on the date of your application. If Medicaid discovers that you did, in fact, gift, transfer or sell assets for below fair market value, you will incur a penalty period. Depending on the extent of your needs, this period could prove costly.
Acceptable ways to spend down your assets
Though you must be careful in how you spend down assets during the lookback period, there are acceptable ways to reduce your countable assets and income to $2,000. Below are the seven exceptions as of January 2021:
- The purchase of medical devices that insurance does not cover
- The cost of home renovations and repairs designed to improve access and safety
- The repayment of debt
- The costs associated with creating a care life agreement
- The cost of vehicle repairs and maintenance, and of selling and buying a new car
- The purchase of an annuity
- The purchase of an irrevocable funeral trust
You must still be careful in how you spend down your money and assets on the aforementioned exceptions, as state law may have exceptions to the exceptions. Discuss allowable spend-down strategies with your estate planning lawyer.