Available Assets: Primary Residence

When someone applies for Medicaid assistance, one of the very first things Medicaid considers for eligibility is the applicant’s ‘available assets.’ In other words, Medicaid wants to know what funds are available to pay for long-term care.

As of 2021, most states require that single applicants have less than $2,000 in assets, while married applicants can keep approximately $130,000 and still be eligible. But which assets are considered available for Medicaid purposes? A recreational vehicle? Mom’s pearl necklace? A 401k?

As a general rule, anything with a paper trail or an account number will be counted as an asset. Bank accounts, retirement accounts, and even some life insurance policies will all be considered ‘available assets’ in the eyes of Medicaid. Other assets, however, can be exempted from the total available assets.

Between this blog and two subsequent posts, I’ll examine which assets count, which don’t, and some options for protecting them. While this is not meant to be a comprehensive list of assets, I hope to shed some light on some of the more common assets that Medicaid will count as available.  

One of the typical questions I hear about assets is whether or not the primary residence counts. Whether the home is owned outright or there’s a mortgage balance, Medicaid only considers the equity in the home as an asset. Medicaid permits applicants to exempt the equity, although states can limit how much equity is allowed to be exempted (as of 2021, most states allow $603,000 in equity).

If your equity in the home is worth more than the limit, the excess amount will be counted as an asset. If your equity is less than the limit, then the entire amount is exempted and will not count as an available asset.

There are also other considerations that should be taken into account regarding a primary residence. Even though the home is an exempt asset, Medicaid may try to recoup some expenses by filing a lien against the home. There are two types of liens that may be used, pre-death and post-death of the Medicaid recipient.

The pre-death lien is known as a TEFRA lien. TEFRA stands for the Tax Equity and Fiscal Responsibility Act, which was passed in 1982. TEFRA liens are the only type of lien that may be placed on the home prior to the death of a Medicaid recipient. However, not all states utilize these liens, and I recommend consulting with a Medicaid Planner regarding TEFRA liens in your state.

The post-death lien is more common. Upon the passing of a Medicaid recipient, the state may place a lien against the primary residence. However, the lien can only be equal to or less than the amount the state paid in benefits.

A primary residence is most people’s largest asset, and while Medicaid may exempt the value at the time of application, planning is needed to protect the home equity in the long run. By working with a Medicaid Planner, you can explore options such as selling the home and spending down the proceeds Medicaid-compliant purchases or gifting the home to a family member if the right circumstances are met.