Is there any way to satisfy the spend down requirement without actually losing the value of the assets?
When one spouse is in need of long term care, and the couple approaches Medicaid for help, they will typically have a resource assessment conducted, which will determine their combined countable resources. Aside from their home, personal property and one vehicle, most everything else of value will be counted. Of the total countable resources available, the community (healthy) spouse will be allowed to keep essentially half (with a minimum of $21,912 and a maximum of $109,560). The balance of the combined resources is considered available to the patient and must be "spent down" before the patient becomes eligible. (The actual term used in the procedures is "reduce countable resources.")
Now, here is where the confusion comes in, and it can be deadly from a financial point of view. Contrary to common belief, the rules do not limit what the couple can spend their resources on. The only requirements are that, (1) they not give it away, and (2) that they get "fair market value" for what they spend or transfer. For example, if Mr. and Mrs. Jones had a $20,000 spend down (reduction of resources) requirement they could, quite literally, go on a $20,000 world cruise and when they came back they would qualify. They could remodel their home, replace their car with a newer one, rent every video in town, etc., just as long as they receive fair market value for their money. All of these actions would help reduce their countable resources. (What wouldn't do them any good would be to buy another resource. For example, cashing in a bank CD to purchase a mutual fund - they really haven't reduced their total countable resources.) The problem with these kinds of expenditures, though, is that once the money is spent, it is gone forever and will be of no future benefit to the community spouse in terms of providing income or support.
The way that people in these circumstances are helped is by identifying how they can "spend" their resources in such ways as to save the value for the support of the community spouse. This is typically done by using the spend down amount to create a Medicaid-approved "income stream" for the community spouse. (The Medicaid rules contain specific technical requirements, such as the nature of the income stream, duration of the income, etc., that must be met to avoid any possible eligibility problems.) Although each situation is unique, by simply spending the money in the "right" way, a couple can often qualify immediately, and still preserve the full value of their life's savings for the benefit of the community spouse. These strategies are basically simple, straightforward and accepted by Medicaid. There is no attempt to "get around" the rules - but to simply utilize the options available within the rules, which were specifically included to protect the community spouse. Unfortunately, without the help of someone experienced and knowledgeable in this field, most couples end up losing a large portion of their life's savings - and it is almost always avoidable. (Although some Medicaid workers may be aware of these strategies, they cannot provide specific financial or legal advice.)
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