When you apply for long-term care through Medicaid, the government requires that you spend down your assets before receiving benefits. However, Medicaid rules are designed to ensure that the spouse who is not seeking aid has enough resources to live on. Therefore, certain assets and income are exempt from this requirement, so it pays to understand the rules and how they apply to your specific situation. Consider working with a financial advisor as you assess your long-term care needs and resources.
Community Spouse Resource Allowance, Defined
The Community Spouse Resource Allowance (CSRA) is used when someone is applying for long-term care through Medicaid. While Medicaid does require that an applicant use his or her assets and income first before receiving aid, the federal government wants to ensure that the spouse has enough assets and income to live on. This calculation determines what amount of assets are excluded from being spent down before Medicaid covers long-term care assistance.
In a CSRA framework, a spouse who is applying for long-term care through Medicaid is known as the “institutional spouse.” This spouse may also be known as the “nursing home spouse.” These terms also are used if they are applying for a long-term care Medicaid waiver to have services in their home or local community. The “community spouse” is the one who is not applying for long-term care Medicaid. This person is also commonly referred to as the non-applicant, healthy or well spouse.
In many states, community spouses are limited to 50% of the couple’s assets or $130,380, whichever is less. However, some states allow the community spouse to keep up to the $130,380 maximum, even if that means that they keep more than 50% of the couple’s assets. Individual states are able to lower their maximum resource standard below the federal maximum.
Which Assets Count Towards CSRA?
When calculating your community spouse resource allocation, it helps to know how assets are treated by Medicaid. Not all assets are counted in CSRA and those that are not are considered exempt.
What assets are protected?
All liquid assets are expected to be used to cover your long-term care needs. Liquid assets include cash, certificates of deposit, stocks, bonds and vacation properties. Liquid assets under the CSRA that are owned by the community spouse are protected. They do not have to be spent before the institutionalized spouse receives Medicaid benefits.
By contrast, some assets are protected from liquidation. These protected assets include a couples’ primary home, household furniture and appliances, clothing and an automobile.
Certain financial assets are also protected. These include irrevocable funeral and burial trusts and term life insurance policies. However, cash value life insurance policies are not protected unless the face value is less than $1,500. With cash value life insurance policies with face values above $1,500, only the cash value is included in the CSRA calculation. The death benefit is not.
How is the couple’s home treated?
The couple’s home is exempt from CSRA as long as the community spouse is living in the home when the CSRA is calculated. The first $603,000 in equity is excluded from CSRA. In some states, this exclusion increases up to $906,000.
Are You Required to Spend Down Your Resources?
Before the CSRA, couples were expected to spend down their resources to a maximum value of $2,000. This left many community spouses without adequate resources to continue living in their homes without relying on federal, state and local aid. The CSRA was designed to reduce community spouse reliance on government aid by allowing them to keep assets intended to pay their living expenses. The current limit is $130,380 and most states allow the community spouse to keep half of that number.
Another consider is a Medicaid asset protection trust. Transferring assets to this type of trust can allow you to qualify for Medicaid to pay for long-term care while preserving your savings.
How to Calculate the CSRA
To calculate your CSRA number, you’ll take a “snapshot” of your eligible assets. This happens on the applicant spouse’s first day of institutionalization or when they qualify for a Medicaid waiver. Remember, that some assets are excluded, such as the couple’s primary home, a car, household furniture and appliances and clothing.
All of the couple’s assets are tallied. Each asset is considered jointly owned, even if only one spouse’s name is on it.
The total of the assets is divided by two, with half considered as owned by each spouse. In some states, community spouses are entitled to up to 100% of the couple’s assets up to the maximum resource allowance for that state. Example states with a 100% CSRA include Alaska, California, Florida, Maine and Mississippi.
The applicant spouse is required to spend down their share until their assets reach the $2,000 Medicaid exemption amount before Medicaid will pay for their long-term care needs.
The Bottom Line
The CSRA rules allow spouses to retain income and assets to continue living within the community without impoverishing themselves. The community spouse can live in their home and keep liquid assets up to the federal maximum CSRA without affecting the nursing home spouse’s benefits. Any assets above these protected amounts are expected to be liquidated to cover nursing home costs.
Tips on Retirement
- Making sure that your spouse has enough money to live on is a concern for most couples. Working with a financial advisor can help you create a plan to address those concerns. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
- Our retirement calculator helps you calculate how much money that you’ll have in retirement to pay bills, have fun and cover medical expenses. Its detailed analysis can provide answers to your questions about paying for long-term care for you and your spouse.
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