Many people assume that Medicare will cover long-term care costs, but this is a critical misunderstanding. While Medicare provides excellent health coverage for medical needs, it does not cover custodial care.
This type of care includes assistance with daily activities like bathing, dressing, or eating. For those needing long-term care in a nursing home or at home, Medicaid is the widely embraced solution. It covers long-term custodial care if you can become eligible.
Eligibility for Medicaid, however, comes with strict income and asset limits, making it necessary to plan ahead. Medicaid planning for married couples will ensure one spouse can qualify for care without impoverishing the other.
Understanding Medicaid Eligibility for Long-Term Care
Medicaid eligibility is determined by a combination of income and asset thresholds. For individuals needing care, the program requires applicants to spend down their resources to minimal levels.
However, for married couples, special allowances protect the financial well-being of the community spouse – the spouse who does not require long-term care.
Without proper planning, these allowances may still leave the community spouse with limited financial security. Medicaid planning ensures that assets and income are structured to protect the community spouse while allowing the other spouse to qualify for care.
The 2025 Spousal Allowances in New Jersey
For 2025, New Jersey provides specific allowances to protect the community spouse when the other spouse applies for Medicaid.
Monthly Maintenance Needs Allowance (MMNA)
The MMNA ensures that the community spouse has a minimum income to cover living expenses. In 2025, the minimum is $2,555.00 per month, and the maximum is $3,948.00 per month.
Community Spouse Resource Allowance (CSRA)
The CSRA determines how much of a couple’s combined assets the community spouse can retain. For 2025 in New Jersey, the minimum resource standard is $31,584.00, and the maximum resource standard is $157,920.00.
Home Equity Limit
Medicaid allows the applicant to exclude the value of their primary residence from countable assets, up to a limit. For 2025, the home equity limit in New Jersey is $1.097 million. If the home’s equity exceeds this amount, the applicant will not qualify unless additional planning is done.
The Role of the Irrevocable, Income-Only Medicaid Trust
One of the most powerful tools for Medicaid planning is the irrevocable, income-only Medicaid trust. This trust allows you to transfer assets out of your name to meet Medicaid’s asset requirements while ensuring those assets are protected for your heirs.
How It Works
- Irrevocability: Once the trust is established and funded, its terms cannot be changed, and the grantor cannot reclaim the principal.
- Income Retention: The grantor can still receive income generated by the trust assets, such as rent from a property or interest from investments.
- Asset Protection: Assets placed in the trust are no longer considered countable for Medicaid eligibility, provided the transfer occurs outside of Medicaid’s five-year look-back period.
By transferring assets to this trust, you effectively shield them from Medicaid’s spend-down requirements while maintaining a source of income and protecting the inheritance for your beneficiaries.
Key Benefits of the Medicaid Trust
- Asset Preservation: The trust allows you to protect significant assets while still qualifying for Medicaid.
- Spousal Protection: Assets in the trust are excluded when calculating the CSRA, ensuring the community spouse has more resources.
- Legacy Planning: The trust ensures that your heirs inherit the assets rather than requiring them to be spent on long-term care costs.
- Flexibility for Income Needs: The grantor retains access to the income from the trust, supporting their financial needs during their lifetime.
Navigating the Five-Year Look-Back Period
Medicaid imposes a five-year look-back period, during which any asset transfers can trigger penalties. This means that any transfers to the irrevocable Medicaid trust must occur at least five years before applying for Medicaid.
Planning ahead is crucial to avoid these penalties. Establishing the trust early ensures that assets are protected when the need for long-term care arises.
Additional Strategies for Medicaid Planning
While the irrevocable, income-only Medicaid trust is a cornerstone of Medicaid planning, other strategies may complement it:
- Spending Down Assets Strategically: Use excess resources to pay down debt, improve your home, or purchase exempt assets like a new vehicle.
- Annuities: Medicaid-compliant annuities can convert assets into a stream of income for the community spouse, reducing countable resources.
- Gifting: Smaller gifts can help reduce assets, but they must be carefully timed to avoid penalties during the look-back period.
An estate planning attorney can help you determine which combination of strategies work best for your unique situation.
Summing It Up
For married couples, Medicaid planning ensures that the community spouse is not left in financial hardship. The CSRA and MMNA provide a safety net, but advanced planning with an irrevocable trust and other tools will maximize protection.
We Are Here to Help!
Our firm can help you create a nursing home asset protection plan that culminates in the effective passing of your legacy. To get started, call our Warren, NJ estate planning office at 908-222-8803 or send us a message through our contact page.
- Can I Write My Own Will, or Do I Need an Attorney? - August 15, 2026
- Is There Any Way to Change an Irrevocable Trust? - August 8, 2026
- How Do You Keep Your Estate Plan Flexible? - August 1, 2026
