My spouse needs nursing home care; Can I keep all of our money?

Medicaid law allows an individual whose spouse needs nursing home care to keep as much as $101,640 in 2007, as well as the house, a car, certain life insurance policies and a few other assets. But this rule is misleading. Consider the following example.

Husband and Wife own a house, a car, and $100,000 in investment assets. Suppose that Husband needs to go to a nursing home. One would think he could get Medicaid immediately because there is only $100,000. However, the rule says that the spouse in the community can keep half of the total assets (the house and car are exempt and not included in this computation) but not more than the maximum amount, or $101,640.

In other words, in this example, Medicaid will not pay the nursing home costs until the couple has spent $50,000 because Wife is allowed to keep only half of the $100,000 they had when Husband entered the nursing home.

Is this the end of the story, or can Wife do something to enable her to keep the whole $100,000?

One solution presents itself when one considers that Medicaid looks at the couple’s assets but not their debts. Hence, one solution to the problem is this: In the month before Husband enters the nursing home, Wife can use the equity in the home to borrow $100,000 and put those funds in the bank, so the couple now has $200,000. When Husband enters the nursing home the next month, Medicaid will measure the couple’s assets. Because their bank account has $200,000 at that time, Medicaid will allow Wife to keep half of that amount, or $100,000.

To complete the process, Wife would use the $100,000 in borrowed funds to repay the home equity loan, thereby reducing her assets to $100,000. By implementing this strategy, Wife set herself up so she can keep all $100,000 of the couple’s assets rather than retaining only $50,000.

This is one of many asset preservation strategies available to married couples if one should require long term care in a nursing home. Some of these strategies enable couples who have substantially more than $100,000 to retain all of those assets and still get Medicaid.

In some instances, one’s advisor will caution that the couple must take action in the month before one of them enters a nursing home. For that reason, prudence suggests consulting with a qualified elder law attorney if there is a chance that nursing home care would be required.