Monday, October 20, 2014

What can I do if I have too much income or resources to qualify for Medicaid?

Financial products to help qualify for Medicaid

Medicaid, the Federal program for the care of the disabled and elderly poor, has strict eligibility requirements: the individual applying for Medicaid must have very low income and little assets. The exact numbers and rules will vary in each state. (To learn more about using Medicaid to pay for eldercare in general, see our article on it.)

In some cases, though, an individual who exceeds the income and asset limits by a relatively small amount may be able to qualify by using financial products to ‘lower’ their income by putting the excess money in an account that limits its use to only certain expenditures. This has created a market for products and services to help people who need assistance to become eligible.


Too Many Resources or Savings

If you are over the asset limits for Medicaid, you can’t just give away the excess as Medicaid examines past financial transactions for up to 60 months preceding application.  
Photo by
John Patrick Robichaud
To help meet the assets limits, Irrevocable Funeral Trusts are an option for some individuals who have less than $15,000 over the eligibility limits. It is important to note that these trusts must be irrevocable. 

Some might wonder why use an Irrevocable Funeral Trust to pay for a funeral. Beyond helping to qualify the individual in need of care for Medicaid, these products also have some other benefits. Instead of pre-paying a funeral home, there is no need to select and plan in detail for a funeral in advance. Also, an irrevocable funeral trust can include the travel expenses for family members who come to the funeral. However, despite these advantages, an irrevocable funeral trust is not for everyone. Learn more about irrevocable funeral trusts in our full article on them

Medicaid Qualifying Annuities are specially designed annuities that help couples where one spouse requires care and the other does not. In these cases, Medicaid rules would otherwise force the well spouse to spend  most of their joint assets on the long term care of the other spouse, leaving him or her with limited resources on which to live. In order to avoid this situation, Medicaid state rules allow the couple to create an annuity from the couple’s assets and name the well spouse as a beneficiary. Find out more about how a Medicaid planner can help create a qualifying annuity.


Too Much Income

Similarly, an individual can be disqualified for Medicaid due to an income that is too high. However, here again, some products have come in existence to help address the situation for certain individuals and couples. 

Qualifying Income Trusts, Qualified Income Trusts, or Miller Trusts help individuals overcome the income cap. In some of states, known as ‘Income cap states,’ there is a cap, or maximum on the amount of monthly income someone can have. While this amount will vary in each state, in 2014, $2,163 per month is the highest state income cap and, in some states, it is less. Income over the Medicaid limits is secured in a trust to ensure it’s used on the care and medical needs of the individual. 

‘Medically needy states,’ without an income cap, look at the income of the individual and require that it be spent down by needed medical and long term care expenses before qualifying the individual. Find out which Medicaid financial criteria apply in your state.

Additionally, nonprofit organizations operate Pooled Income Trusts. These jointly managed trusts have lower administrative costs by pooling together many qualifying individual trusts within the state. These are often used in the case of disabled persons, but elderly can also qualify if all transfers take place before the age of 65. Special Needs Trusts have a similar application, but are not pooled and managed by a nonprofit.


Get Help

For both income and asset qualifying products, Federal rules are complex and state rules also matter and vary widely. For example, sometimes one might encounter products known as a ‘Medicaid Qualifying Trusts,’ which are, in fact, no longer compliant for Medicaid. 

Find out more on our site and seek the services of a professional Medicaid planner and/or elder law attorney when you are ready.