Medicaid planning is a subject that is seldom discussed in society. As a result, many people are unaware that they need to take certain steps if they eventually need to qualify for benefits. In New Jersey, Medicaid eligibility involves strict asset limits, which can inspire challenges for those who own valuable assets like a vacation home. As a result, if you own a vacation home and are considering Medicaid for long-term care, planning ahead is going to be important.
For 2024, an individual applying for Medicaid can own no more than $2,000 in countable assets. A primary residence may be exempt from this count, provided it meets certain criteria, such as being the applicant’s home and having an equity value below a specified threshold. However, a vacation home is typically considered a countable asset, which can jeopardize an individual’s Medicaid eligibility.
Since Medicaid considers a vacation home a countable asset, owning one could prevent you from qualifying for benefits. The value of the vacation home is added to your total assets, which may push you over the allowable limit. For example, if your vacation home is worth $200,000 and your other countable assets total $50,000, your total assets far exceed Medicaid’s eligibility limit.
What can be done?
There are strategies that can help you to protect your investment in your vacation home and allow you to still qualify for Medicaid, but they require careful planning. Some options include:
- Transferring the Home to a Trust: One way to protect your vacation home is by transferring it into an irrevocable trust. By doing so, the home is no longer considered a personal asset. However, you must be aware of Medicaid’s five-year “look-back” period. Any transfers made within five years of applying for Medicaid may result in penalties or delays in eligibility.
- Gifting the Home: Another option is gifting the vacation home to a family member or loved one. However, like transferring the home to a trust, gifting is subject to the five-year look-back period.
- Selling the Home: In some cases, selling the vacation home and using the proceeds to cover long-term care expenses may be the most straightforward solution. The remaining funds could be spent down in a manner that complies with Medicaid rules, allowing you to meet the asset limits.
It isn’t hard to see that Medicaid planning can be a complex task, especially if you own valuable assets like a vacation home. Thankfully, seeking legal guidance and support is always an option.
