If you ever need long-term care, there’s a good chance you’ll turn to Medicaid for help. Medicare only covers short stays and limited services, leaving most nursing home costs uncovered.
Medicaid fills the gap, but it comes with strict eligibility rules that make advance planning necessary, and there’s one important catch. After you pass away, the state may try to recover what it spent from your estate. That’s why smart elder law planning matters.
Medicaid’s Asset Limit
New Jersey requires you to have no more than $2,000 in countable assets to qualify for long‑term care Medicaid. Countable assets include money in bank and investment accounts, stocks and bonds, cash, and additional real estate beyond your primary home.
Crossing that limit means Medicaid will deny or delay your application unless you “spend down” assets or move them into a legally acceptable arrangement well before applying.
Know Which Assets Medicaid Does Not Count
Medicaid exempts certain assets from being counted. You can keep:
- Your home, as long as you intend to return or a spouse or dependent relative lives there. Equity can be up to $1,097,000
- One vehicle, regardless of its value
- Your personal belongings and household items
- Prepaid burial arrangements
- Life insurance with low or no cash value ($1,500 or less)
Assets not mentioned here are countable. You need to clearly separate exempt from countable resources to prevent eligibility issues.
Your Spouse Is Guaranteed Protections
If one spouse needs care while the other stays at home, the non-applicant spouse can keep more than just the $2,000 asset limit.
New Jersey allows the community spouse to keep a Community Spouse Resource Allowance (CSRA) equal to half the couple’s countable assets, up to $157,920, but never less than $31,584
The community spouse is also eligible for a Monthly Maintenance Needs Allowance, which lets them retain income to cover expenses so they do not fall into poverty. There is a maximum of $3,948 this year, and the minimum is $2,555.
Be Wary of Medicaid’s Five‑Year Look‑Back Rule
Medicaid reviews financial transactions over the five years (60 months) leading up to your application. Any asset transferred for less than fair market value, like a gift or a transfer into a trust, can trigger a penalty period of ineligibility. That period lasts until the value of the transfer is “used up” based on average Medicaid costs in your area
An Irrevocable Income-Only Medicaid Trust Can Help
An irrevocable income-only Medicaid trust, also known as a Medicaid asset protection trust, allows you to remove certain assets from Medicaid consideration if funded at least five years before applying.
You transfer assets like real estate or investments into the trust. You lose access to the principal, but the trust can pay you income and preserve wealth for beneficiaries.
As long as no transfers occurred during the look-back period, you can maintain your eligibility and protect valuable assets.
Medicaid Estate Recovery
You can qualify for Medicaid and keep your home, but Medicaid estate recovery will be looming. After your death, the program can place a lien on the property to recoup funds paid out on your behalf.
To prevent this outcome, you can transfer your home to a Medicaid trust. You would be able to live in it as usual, so there would be no disruptions. As long as you apply for Medicaid at least five years before placing the home in the trust, it would not be subject to Medicaid estate recovery.
The Child Caregiver Exemption Offers Another Option
If one of your adult children has lived in your home for at least two years and provided care that prevented you from needing nursing home placement, you may qualify for the child caregiver exemption.
This allows you to transfer the home directly to that child during the look‑back period without penalty. Medicaid recognizes the caregiver’s contribution and permits the transfer in recognition of that support.
Attend a Free Webinar!
We make a concerted effort to provide educational opportunities to members of the community. In addition to the written materials that you will find on our site, we also host webinars.
These events get a lot of positive feedback, and there is no charge, so this is a great way to build on your knowledge. To see the dates and obtain registration information, visit our webinar schedule page.
Need Help Now?
If you have already decided that you are ready to work with a Warren, NJ elder law lawyer to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 908-222-8803.
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