Countable, Non-Countable and Exempt Assets in Medicaid Planning

//Countable, Non-Countable and Exempt Assets in Medicaid Planning

Countable, Non-Countable and Exempt Assets in Medicaid Planning

[From The Long Term Care Solution by Jeffrey G. Marsocci]

I meet with people all of the time who have loved ones that will need skilled nursing care, but, like deer caught in headlights, they are too uncertain to make any move at all. As months go by, the family loses opportunities to plan, and the options in a properly constructed Care Assistance Plan dwindle until the “planning ahead” becomes “crisis planning.” While there is still a tremendous amount we can do to save money for the family in a crisis situation, it pales in comparison to what can be saved when there is more time.

Take Mr. Johnson, for example. I met with him when his wife was initially diagnosed with the beginning stages of dementia but was still able to get around. I laid out what we offer in the form of a comprehensive Care Assistance Plan, but he wanted to try doing it himself. I heard about a year and a half later that he declared bankruptcy because he had tried to accomplish a spend down on his own, ended up mortgaging his home and farm to comply with the Medicaid rules, and then didn’t have enough money to pay both the mortgage and his other bills. While we didn’t do a Care Assistance Plan for him and his wife, I know that we would have been able to set things up so he would have been able to keep the home and farm, have enough monthly income to handle all of his debts and expenses, allow him to have more than $100,000 in assets in his own name, and transfer at least $50,000 more to his children. But he never took action.
But what needs to be looked at for a good Care Assistance Plan? How are assets classified and so much money saved for the family? Here are the types of assets, and in the next section we will review some of the boundaries surrounding the techniques we employ. As an important note, these classifications are also important when it comes to Care Assistance Planning for the Veterans Aid and Attendance benefit although the boundaries for the VA benefit are different than Medicaid-based Care Assistance Planning. But that might be a better topic for another book.

Countable Assets
Countable assets are the most common assets people want to be able to preserve apart from sentimental, personal items. These are generally the liquid assets that people own that can be converted to cash easily. Consequently, these are the types of assets in a Care Assistance Plan that need to be spent down to the appropriate limits, or converted to assets that are exempt or not counted. For example, the following are considered countable assets:
• Cash, checking, savings, money market, and CDs
• Stocks, bonds, mutual funds, brokerage accounts
• IRAs, 401ks, 403bs, SEP IRAs, Keough Plans, and other retirement plans with a balance (as opposed to monthly pension payments that come to you for life; that is considered income and not an asset)
• The cash value of life insurance and annuity balances (meaning the annuity has not been annuitized yet)
• All autos, trucks, boats, machinery, etc. beyond the first automobile
• Real estate beyond what is Exempt or Unavailable
• Any other deposits that can be accessed or refunded if not used, such as retirement community “buy-ins”, pre-paid rent, pre-paid utilities, etc.

Basically, if you can access it and easily convert it to cash (or even not so easily in the case of real estate), then it counts towards the limits you are allowed to keep, or you and a spouse are allowed to keep, and any excess must be spent, converted, or gifted appropriately in coordination with a Care Assistance Plan. (NOTE: DO NOT JUST START GIFTING ASSETS. THIS IS ONE REASON PEOPLE GET IN FINANCIAL TROUBLE WITH THE MEDICAID OFFICE).

Non-Countable/Unavailable Assets
In addition to Countable Assets, there are also assets that are Non-Countable, or better known as “Unavailable” Assets. In these instances, they may be assets that would normally be countable but for some reason are not immediately available or easily liquidated. These assets are:
• An inheritance prior to it being distributed to you
• Lawsuit proceeds before the judgment is collected and distributed to you
• Jointly-owned real estate that would cause an undue hardship to the other owner or other real estate with a legal impediment that makes it hard or impossible to sell
• Other property rights that cannot be liquidated, such as a “life estate” (a lifetime right to live on the property without actually owning the property)

The key to the unavailable assets category is that there is no way to actually get cash from the asset now. In other words, you cannot be denied Care Assistance because you are going to get a large inheritance when an estate settles. However, once the estate assets are in your possession, they end up becoming countable (or possibly Exempt) assets. Some of our Care Assistance Planning techniques involve making countable assets get tied up legally to become unavailable.

Exempt Assets
Exempt Assets are the third and most important category when it comes to a Care Assistance spend-down, because these are otherwise countable assets that you get to keep. The list is different for individuals versus couples, and so we’ll break this into two lists.

For Individuals
• Cash in the amount of $2,000 or less.
• The home with about $525,000 in equity (again, we’re not going to use exact numbers because these can change quickly and can vary by state). There are some major restrictions on the home that are beyond the scope of this section and you should discuss it with a professional.
• One Automobile (again, within certain restrictions).
• Personal Property, such as clothing, furniture, electronics, and jewelry (to an extent).
• Funeral account, burial insurance, and burial spaces (within limits, and for the burial spaces, potentially also for immediate family members).
• Life insurance with no cash value (or with the cash value counted as part of the $2,000).
• Certain other assets that are more appropriate for a conversation at our office.

For Married Couples
• Cash in the amount of $2,000 or less for the spouse needing care; cash in the amount of approximately $115,000 or less for the spouse not needing care.
• The home with an unlimited equity value. There are some major restrictions on the home that are beyond the scope of this section and program that we can address at our office.
• One Automobile (again, within certain restrictions).
• Personal Property, such as clothing, furniture, electronics, and jewelry (to an extent).
• Funeral account, burial insurance, and burial spaces (within limits, and for the burial spaces, potentially also for immediate family members).
• Life insurance with no cash value (or with the cash value counted as part of the $2,000).
• Certain other assets that are more appropriate for a conversation at our office.

These are the three main categories of assets that we need to deal with in a good Care Assistance Plan. In most cases, we want to maximize the Exempt assets, plan for the Non-Countable/Unavailable assets, and restructure or transfer the Countable Assets to get them below the limits for Exempt assets. As I discussed in the introductory chapter, there is no way that I can teach you enough to be able to put together a good Care Assistance Plan on your own, but at least I can give you enough information to understand the basics and, hopefully, convince you to work with a competent professional as soon as possible instead of trying it on your own or putting it off to another day.

Unlike other areas of life and the law, there are very few mulligans or “take-backs” to try it again once a mistake is made in Care Assistance Planning. And these mistakes can cost into the hundreds of thousands of dollars.

By | 2017-05-20T16:43:19+00:00 September 14th, 2016|Company News|0 Comments

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