One of the most common misconceptions I encounter in Medicaid planning is the belief that ownership depends entirely on whose name appears on an account or title. As far as Medicaid is concerned, that assumption is often incorrect.
The context in which I frequently meet with people has to do with Medicaid planning. A family member will come to see me and tell me that “Mom has these assets in her name” and “Dad,” who now needs care in a nursing home, “has these assets in his name” or “has no assets in his name.” The thought is that Dad will qualify for Medicaid benefits immediately because he has no assets.
Unfortunately, Medicaid does not determine ownership the same way most families do.
Medicaid is a health insurance program for needy individuals. In order to qualify for Medicaid, a person must have a limited amount of assets and insufficient income to pay for his care. If an unmarried individual wishes to qualify for Medicaid, he must have less than $2,000 in assets. With a married couple, the spouse who does not require care, called the “community spouse,” can retain up to approximately $115,000 in cash assets, plus the home, a car, and personal property.
The $115,000 figure is a maximum amount of cash assets that the community spouse can retain. The community spouse can only retain the maximum amount if the couple’s combined cash assets meet or exceed approximately $230,000. If the couple’s assets are less than that amount, the community spouse retains less than the maximum.
The reason the Medicaid laws permit the community spouse to retain these assets is because Medicaid pools the assets of a married couple. In other words, whatever assets one spouse owns, as far as Medicaid is concerned, the other spouse owns as well.
If the wife owns all of the assets and the husband requires care in a nursing home, the wife’s assets count against the husband’s eligibility for Medicaid benefits. Even if the wife’s assets came to her by way of inheritance or gift, which would typically be exempt from equitable distribution in the context of a divorce, as far as Medicaid is concerned, those assets belong to the husband as well.
It is because Medicaid combines the assets of the married couple that Medicaid permits the community spouse to retain the community spouse resource allowance. If Medicaid did not permit the community spouse to retain these assets, then the community spouse would be impoverished because the spouse in the nursing home can only retain a very limited amount of assets.
Another common misconception involves a parent adding a child’s name to a bank account. Many people have come to see me and said, “I’m on Mom’s bank account, so Mom only owns half the account. The nursing home can only take half.”
These statements are incorrect.
If Mom added her son’s name to her bank account that holds Mom’s money, then the money remains Mom’s in its entirety. Simply adding another person’s name to a bank account does not transfer any portion of the assets in that account to the new joint owner as far as Medicaid is concerned.
The bottom line is that Medicaid has its own rules for determining ownership and eligibility. If people could qualify for Medicaid simply by adding another person’s name to an account or transferring all of their money from the ill spouse to the well spouse, the laws governing Medicaid eligibility would have little meaning.
Medicaid planning is rarely as simple as changing the name on an account or transferring assets between family members. Medicaid’s rules regarding ownership and eligibility are often very different from what families expect. Understanding those rules before applying for benefits can help avoid costly mistakes and missed planning opportunities.