Reed: Medicaid planning mistake: Needlessly spending down

Sandra W. Reed
Special to the Reporter

Clara is entering a nursing home, but her husband, Clancy, is remaining in their home. The nursing facility told them that for Clara to qualify for Medicaid they would have to spend down their countable resources to $3,000.

Fortunately, before they had emptied their savings account by paying the nursing home expenses out of pocket, their son, Clarence, consulted an attorney. This is what they learned.

Sandra Reed

Spousal impoverishment rules for Medicaid stay-at-home spouse

Clara and Clancy have countable assets worth $200,000. Countable assets, for purposes of Medicaid, include cash, stocks and bonds in their checking, savings and brokerage accounts. Based on 2021 Medicaid Guidelines, the stay-at-home spouse may retain one-half the couple’s assets, up to $130,380. Thus, Clancy can retain $100,000.

Under this scenario alone, Clara’s $100,000 would have to be spent down to $2,000. If their total countable assets had been less than $26,076, Clancy could keep 100% of these countable assets.

There is another wrinkle to this Medicaid story that allows Clancy to retain even more assets.

Minimum Monthly Maintenance Needs Allowance (MMMNA)

In addition to keeping the $100,000, Clancy can retain as income a Minimum Monthly Maintenance Needs Allowance (MMMNA), which for 2021 is $3,259.50. In this instance, Clara and Clancy’s income is from Social Security alone with none of their assets income-producing. Their combined gross amount is $2, 319.50.

Expanded Protected Asset amount

Since their income is less than the $3,259.50 allowed, the Protected Resource amount he can keep can be expanded above the $100,000 Clancy has been allowed to keep. Clara is allowed to retain $60 for Clara’s monthly personal needs allowance. To bring the income up to the allowed amount of $3,259.50, they will need a CD that pays $1,000 a month. Therefore, Clancy can retain the entire $200,000 in countable assets. If the couple had it, Clancy could retain even more. For instance, if one-year CDs in their area are paying only 1% annually, the amount required to bring them the extra $1,000 would be $1,2000.

As this example illustrates, when a couple’s income is below the MMMNA, based upon today’s low interest rates for CD’s, the couple may be able to retain hundreds of thousands of dollars and still qualify for Medicaid.

Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at 254.797.0211; 817.946.2809 or at sreed@kbzlaw.com.