We’ve moved! We didn’t go far and look forward to seeing you in our new space located at 1255 Crescent Green Drive, Suite 200, Cary, NC 27518

Medicaid Spend Down Planning in North Carolina

Cary, NC Elder Law Attorney

A common question from potential clients desperately trying to navigate the Medicaid Long-Term Care minefield is “do I need to spend all of my parent’s assets in order to have them qualify for Medicaid?” This is a very common misconception among people who are new to Medicaid application process. Many people think “Spend Down” means “spend all of the money” – but Spend Down planning actually involves converting assets, not necessarily wasting them.

Countable and Non-Countable Assets

At a very basic level, Medicaid eligibility requires both that a person be disabled, and that they have assets worth less than $2,000 in total value. Many people think this means all asset, when it actually only refers to countable assets. So, what are Medicaid Countable Assets? Countable assets generally refers to things that can and should be used to pay for the applicant’s own medical care – most often cash and cash equivalents, stocks, bonds, etc. But it also includes a second home, a second car, retirement assets, cash-value life insurance, and other assets that could be liquidated without leaving the applicant homeless and without support. Medicaid always wants to be the payer of last resort, so to the extent and individual has these resources, and the resources are available to the applicant, Medicaid will count these assets against the applicant’s $2,000 asset limit.

Non-countable assets will generally include things like the primary residence (equity up to approximately $560,000 if the applicant intends to return home at some point – this is a subjective standard), one car (no value limit), pre-paid funeral plan, assets that cannot be sold (like a timeshare), household furnishings (must be reasonable), personal effects and clothing (also must be reasonable), etc.

Converting Countable Assets to Non-Countable Assets

While one way to reduce your loved one’s assets is to spend them all in a very literal sense – think vacations, gambling, eating out every night, etc., the better strategy is to convert countable assets to non-countable assets. For example, if an individual has $100,000 in cash in their checking account, they would be ineligible for Medicaid because they have well over the asset limit for eligibility. But, if they took $50,000 and renovated their kitchen and back porch, and spent the other $48,000 (leaving $2,000 in cash) on a new car (while also trading in an existing car), the applicant would again be eligible for Medicaid Long-Term Care. Rather than wasting the excess funds, they are enjoying the benefit of those assets or allowing others to enjoy the benefit while they are in a skilled nursing facility.

Don’t Gift as a Crisis Strategy

While Spending Down is a very useful crisis planning strategy (planning for Medicaid eligibility following an unexpected illness or injury which renders the applicant disabled), gifting should never be part of a crisis planning strategy. Gifting is the giving away of assets to others in an attempt to reduce a person’s assets below the required threshold. However, Medicaid penalized gifts made for the purpose of obtaining Medicaid eligibility if the gift is made within five (5) years of the date of application. Gifting should only be used as an advance planning strategy well before the need will arise. Applicants will be penalized one month of eligibility for every $6,500 in value they gift during the “Five Year Look Back Period.”

Consult an Experienced Elder Law Attorney

Don’t take Medicaid planning lightly. These sorts of complex planning strategies should not be attempted without proper legal guidance. Contact an experienced elder law attorney in Cary, NC today if your loved one is in need of Medicaid planning.

Author Bio

Paul Yokabitus

Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.

Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.

LinkedIn | State Bar Association | Avvo | Google