Many people will need long-term care at some point in their lives. Since the cost of nursing homes and assisted living facilities is prohibitive, most Maryland residents can’t afford it and must turn to Medicaid to pay the costs of care for them. However, to qualify for Medicaid, people must meet stringent asset and income guidelines or be forced to spend down their assets to pay for their care.
Medicaid eligibility requirements
To qualify for Medicaid under current Maryland rules, a single individual must have less than $2,500 worth of countable assets. While not all assets are countable, the following are:
- A vehicle other than the individual’s private vehicle that is seven years old or newer
- Bank accounts
- Cash value of a life insurance policy above $2,500
- Real property other than the individual’s residence
- Certificates of deposit
- Stocks and bonds
If you have assets that total at least $2,500 in value, you’ll have to spend them down to fall below the Medicaid eligibility threshold to qualify. However, you can avoid this issue as long as you plan carefully several years in advance to change countable assets into non-countable ones.
Establishing an irrevocable trust
One way to get around the issue is to establish an irrevocable trust. When you create an irrevocable trust and transfer your assets to it, you will no longer own the assets held by the trust. Instead, the trust will own the assets, so they won’t be countable for Medicaid purposes as long as you create the trust and complete the transfers well enough in advance.
Medicaid has a five-year lookback period for determining Medicaid eligibility to pay for long-term care. Any assets you transfer, sell, or give away during that five years can be counted for Medicaid purposes. This means that you must create an irrevocable trust at least five years before you will need to enter a nursing home or assisted living facility.