Medicaid
WashingtonWashington Medicaid Asset Rules
By Elizabeth A. Perry, Attorney at Law
The thought of all one's assets being wiped out if nursing home care becomes
necessary is frightening. It is important to be informed regarding the rules
that apply when the State helps pay for nursing home care. By knowing those
rules, one can plan ahead.
Medicaid applies an "asset test" before a person can qualify for Medicaid
paying for nursing home care as follows:
a) A single person is allowed $2,000, plus one car is exempt, no matter how
much it is worth, if it is used for transportation for the Medicaid
recipient or a member of the recipient’s household; a $1,500 burial fund or
life insurance with a face value of $1,500 (or various combinations thereof)
or an irrevocable prepaid burial plan; a burial plot; a home if the equity
interest is not greater than $500,000 (however, the home will be subject to
a Medicaid lien) and household furnishings and personal effects.
b) A married couple, where one spouse is "institutionalized" on or after
August 1, 2003, is allowed: a) $2,000 plus b) the greater of $45,104 or ½
their assets on the first day of "institutionalization"** up to a maximum of
$104,400. In addition they are allowed at least one car, a home and
household furnishings and personal effects. Each spouse is allowed a burial
plot plus a $1,500 burial fund or life insurance with a face value of $1,500
(or various combinations thereof) or an irrevocable prepaid burial plan. The
exemption for the home does not apply if the equity interest is greater than
$500,000 unless one of a few exceptions apply. One of the exceptions is
that the Medicaid recipient’s spouse resides in the home.
If nursing home care suddenly becomes necessary, many people immediately
think, "I'll transfer my assets to my family so I can meet the Medicaid
limits on resources." The problem is gifts*** made within 60 months of
applying for Medicaid and (with a few exceptions) made to someone other than
one's spouse will disqualify the applicant. This is called the 60-month
"look-back" period. The period of disqualification before one can qualify
for Medicaid is calculated by dividing the total gifts made in a month by
the average daily cost of nursing home care (which as of 10/07 is $206 per
day) and rounding down to the next whole number and the result is the number
of days one will have to wait after one would be otherwise eligible for
Medicaid to pay for long term care services based on an application approved
by the Department of Social and Health Services.
The following are some options, other than dissolution of marriage, that a
married couple has when nursing home care becomes necessary and the couple's
assets exceed Medicaid's limits:
a) Many couples in this situation consider the purchase and annuitization of
an annuity. This does not need to be done until shortly before application,
but one needs to check the rules carefully. Some, but not all, of the
requirements are that the annuity must be irrevocable, non-transferable,
have no cash surrender value, and the payout term cannot exceed the life
expectancy of the Medicaid applicant or spouse. If done correctly, the
annuity will count as "income" and not as a "resource". On February 8,
2006, Congress made changes to the law on annuities including the
possibility of the state needing to be a beneficiary of the annuity. It will
not be clear until the state adopts its rules what the exact requirements
will be.
b) Strategies involving the home are important. Options include paying off
the mortgage, repairing and remodeling the home, or buying a larger home to
protect excess assets. In addition, excess assets can be used to purchase
household furnishings, appliances and a new car.
Once a spouse is on Medicaid, it is vital to review whether the couple still
wants to use a Community Property Agreement. Most people will not want all
assets to go to the institutionalized spouse (thus disqualifying him or her
for Medicaid) if the healthy spouse dies first. Often, the healthy spouse
will prefer to have a special needs trust in his or her will to take care of
the Medicaid spouse. The couple also needs to consider whether transferring
the home to the healthy spouse so that the State does not impose a lien is a
strategy they wish to pursue.
Prior to one being in crisis, one should consider whether long-term care
insurance is appropriate. Also, everyone should review whether their powers
of attorney grant gift-giving powers, since that can be very helpful in
dealing with Medicaid issues.
The rules regarding Medicaid disqualification are continuously changing****
and it is important to be as well informed as possible to be able to take
advantage of the planning options that continue to be available.
(The above should not be construed as specific legal advice and is intended
for general information purposes only. Also, because Medicaid laws change
constantly, review the status of the law at the time you take any action.
This is especially important during the time prior to Washington State
adopting its new rules.)
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*President Bush signed new federal Medicaid legislation on February 8, 2006.
The state of Washington is writing rules to implement Congress’ changes in
Washington state. Those rules have not all been adopted yet. It makes
planning prior to the adoption of the rules problematic.
** As defined by DSHS
***Gifts made prior to May 1, 2006 are subject to a different analysis.
****This article was last revised to reflect Medicaid rules for January 1,
2008.