Is property owned in an LLC counted as an asset when applying for Medicaid?
Yes. In order to receive Medicaid coverage of healthcare or nursing home care there may be limits on your assets and income. This can depend on the state in which you live, your age, and the type of coverage you’re seeking. In most states, to get Medicaid coverage of nursing home care you are limited to $2,000 in “countable” assets and your spouse is limited to approximately $130,000. Almost everything you might own is counted against these limits with a few exceptions. The principal exception is that your home is not counted if its value falls within certain limits. Some states also don’t count retirement plans.
Your question is whether holding property in a limited liability corporation (LLC) will exempt it from being counted against the Medicaid asset limits. The answer is that the property would still be counted because an interest in an LLC is countable like any other investment.
Instead, people planning to shelter assets from having to be spent down to achieve Medicaid eligibility typically use irrevocable trusts. Such trusts work because the grantor gives up control and access to the property. He or she may still be able to receive income produced by the property or be able to use real estate placed in trust, but cannot access the principal. The creation of the trust causes the grantor to be ineligible for most Medicaid benefits for the subsequent five years, the so-called “look back” period.
Seniors often put their homes in irrevocable trusts for long-term planning purposes even though they are not an impediment to receiving Medicaid coverage. They do this for two reasons:
First, if the owner does move to a nursing home, the family may want to sell the house. If they do so, the proceeds of the sale will no longer receive the same protection accorded a home and they would have to be spent down on the owner’s care. However, if the proceeds are in trust, they will be protected and not have to be spent down.
Second, while a home is noncountable for purposes of receiving Medicaid coverage, it is subject to claim upon the owner’s death by the state for reimbursement of its expenditures on the owner’s behalf. This is known as “estate recovery.” The irrevocable trust protects the property from estate recovery.
Disclosure: Harry Margolis practices elder law, estate and special needs planning, and is the majority owner of ElderLawAnswers.com.