Converting Countable Assets to Non-Countable Last Updated January 28, 2018
Table of Contents:
- How Does It Work?
- Who is it for?
- How do I begin converting my assets?
Your Medicaid eligibility is determined in large part by the assets you hold. The fewer assets you have, the closer to eligible you are. However, not all assets are treated the same. When considering your Medicaid application, your Medicaid caseworker will look at your "countable assets," broadly defined as anything that could potentially be used to pay for medical care (for example, money in your savings account). Everything else (for example, your home or car) is deemed "non-countable," and has no affect on your Medicaid application.
The strategy of converting countable assets to non-countable is a suite of methods designed to legally transform some of your countable assets to non-countable, thereby making you eligible for Medicaid sooner than you otherwise would be.
How does it work?
There are many ways to convert countable assets to non-countable. Here are a few:
Home purchase or home improvements
Since the home (the house or condominium in which you live) is a non-countable asset, one way of converting your assets is by using your savings to make home improvements. Home improvements increase the value of your home, so you aren't simply spending money that you won't see again. Potential improvements include additions to the house, re-roofing, kitchen or bathroom remodeling, walkway or driveway re-pavement, etc.
Alternatively, you could sell your existing home, combine the money obtained from the sale with your existing savings, and buy a more expensive home. Again, because a home is an excluded asset, you've converted a countable asset (your savings) to non-countable. However, there are details to consider, including rules about maximum home equity and capital gains, length of time in the home as a primary residence, etc. In some states, without proper planning, Medicaid can request to be repaid for the care they provided from the sale of the house in Probate court. If you plan on leaving equity in a house, make sure you talk to a medicaid expert. A Medicaid expert can offer advice.
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Other real estate and income-producing property
In many states, property that you do not personally use, but own and rent to others, is also a non-countable asset. This can be a great way of spending down countable assets by using your savings to purchase real estate and turning it into revenue-generating income through rent. This notion of "property" even extends beyond real estate to other tangible items that you could rent to others. Keep in mind, however, that the income would be counted as such, and if your total income is too high, you may not qualify for Medicaid. Again, a Medicaid expert can advise.
Another way of converting savings is by purchasing a new car, since one automobile is considered non-countable (if you own two or more autos, those are countable assets). This is the case even if you can't drive, so long as you own it and it is used by another person to provide transportation for you. It is not necessary, but may be practical, to use this opportunity to purchase a wheelchair-accessible vehicle.
In theory, there is no limit to the value of a non-countable automobile. However, a Medicaid caseworker may consider an extravagant purchase (an exotic or luxury car) to be a investment and therefore a countable asset.
Personal property is almost always an excluded asset, so another way of spending down countable savings is by purchasing new personal items such as electronics and clothing. The one caveat here is that, like the extravagant car noted above, spending too much on items like jewelry or art could be considered an investment, and therefore a countable asset.
Paying for living expenses in advance, such as insurance or electrical bills, is usually not an effective way of reducing countable assets, because those payments are typically refundable, and if refunded, they could potentially be used to pay for medical care. However, certain prepayments can be effective, such as paying real estate taxes in advance.
Funeral and burial costs
Expenses that are always a good idea to prepay include funeral and burial costs, which otherwise would be left to family members to pay, and are non-countable as an asset or gift (even when paying for the funeral or burial of a family member).
Depending on your state of residence, it may also be possible to reduce your countable assets by purchasing a "no cash value" life insurance policy. Generally, this type of policy is not treated as an asset or a gift, and is therefore non-countable. However, some states have created rules to treat these policies as gifts (Michigan) or have required that the state be named as a beneficiary of the policy (Delaware).
Another tool for converting countable assets into non-countable is a Medicaid Annuity - an insurance product that you purchase for a specified amount, under the agreement that the insurance company will pay that amount back to you in regular intervals over time. It turns what would have been a countable asset (the amount of the annuity) into small amounts of monthly income. However, the annuity must be crafted carefully by an expert who understands the annuity in the context of your overall Medicaid strategy, and your state's annuity-related rules.
Let's say you have $75,000 in countable assets, including bank account balances, certificates of deposits, stocks and bonds, etc. If you apply for Medicaid now, you would be denied coverage, because Medicaid rules require you to spend nearly all your countable assets before becoming eligible. But if you were to spend the $75,000 towards non-countable items, such as a new kitchen in your home, a new computer and television, and prepayment of your or a loved one's funeral costs, and then apply for Medicaid, you would be eligible immediately, assuming you otherwise qualify.
Who is it for?
The strategy of converting countable assets to non-countable can be an effective tool for anyone with too many assets to qualify for Medicaid. Since all states use the concept of "countable" vs. "non-countable" assets, one or more of the above methods should work for you. However, each state has it's own rules, and an effective strategy must take them into account.
How do I begin converting my assets?
Converting countable assets to non-countable can be complex, requiring knowledge of your state's particular rules governing capital gains, property, insurance and annuities, and more. The right strategy can save you many thousands of dollars, but mistakes can be costly, leading to a delay or denial of Medicaid coverage. Professional advice from a Medicaid expert is essential.