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Limits of the Medicaid Primary Residence Exemption

November 6, 2018

In order to qualify for Medicaid nursing home coverage, a person’s total assets must be under a certain level. For many people, their main asset is their home. Under Medicaid’s asset cap, a person’s primary residence is exempt from the asset cap. However, this exemption is less valuable than it may seem at first glance.

The main reason that limits the value of any Medicaid asset exemptions is when a person passes away, Medicaid places a lien on the estate for the value of any services provided. Previously exempt assets are then subject to this lien. Due to the high cost of nursing home coverage, almost any stay can result in a lien that eats up most, if not all, of the value of a house.

Additionally, even in a nursing home, individuals would still be responsible for the costs of home ownership, including taxes, insurance, and general maintenance. These costs alone may make trying to hold on to the ownership of a house while receiving Medicare nursing home coverage untenable.

The other major limitation of the primary residence exemption is that there is a limit on the amount of equity a homeowner can have and still receive the exemption. In Missouri, the limit is $572,000 in equity for 2018. A few states have higher limits.

The good news is that given enough time, individuals can protect their assets while still allowing for the possibility of future Medicaid nursing home coverage.

The main time period to look out for is the five-year look back period. When applying for Medicaid nursing home coverage, Medicaid looks back five years and adds back any assets that were transferred away at below market value.

While there are methods that would protect just the primary residence from nursing home costs, these methods can be limited in scope and still involve unnecessary costs for the current homeowner and their potential beneficiaries.

A more comprehensive plan that maintains a person’s life earnings would be the creation of an asset protection trust. An asset protection trust, drafted by an experienced elder law attorney, would potentially allow for the protection of a primary residence and other assets from nursing home costs and allow for the assets protected by the trust to be passed on to a person’s beneficiaries free and clear of any Medicaid liens.

An experienced elder law attorney can create a plan to protect a client’s assets that is tailored to that specific client’s needs. These plans can even allow for a person with relatively modest assets to plan for a potential nursing home stay while passing on the family home to a person’s beneficiaries.

To create a plan to protect your assets from potential nursing home costs, please call Martha C. Brown & Associates at (314) 962-0186.

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Martha C. Brown & Associates, LLC assist clients with Estate Planning, Elder Law and Probate in St. Louis City, St. Louis County, St. Charles County, Jefferson County, Franklin County and the surrounding areas including Arnold, Ballwin, Barnhart, Bellefontaine Neighbors, Black Jack, Bonne Terre, Brentwood, Bridgeton, Cedar Hill, Chesterfield, Clayton, Crestwood, Creve Coeur, Crystal City, Des Peres, DeSoto, Ellisville, Farmington, Fenton, Festus, Ferguson, Florissant, Fredericktown, Frontenac, Hazelwood, Herculaneum, High Ridge, Hillsboro, House Springs, Imperial, Kirkwood, Ladue, Lake St. Louis, Manchester, Maplewood, Maryland Heights, Mehlville, Normandy, O'Fallon, Olivette, Pacific, Pevely, Richmond Heights, St. Ann, St. Charles, St. Clair, St. Peters, Ste. Genevieve, Sunset Hills, Town & Country, University City, Union, Valley Park, Washington, Webster Groves, Wentzville , Wildwood.