The Medicaid spend down is the amount of countable assets that a person must spend on medical expenses before qualifying for Medicaid. Managing how best to handle the spend down is an essential part of Medicaid planning, and it begins with understanding the difference between compensated and uncompensated transfers.
A compensated transfer is simple, and in essence you get something of fair market value for your money. For example, if you spend $30,000 on a car that is worth $30,000, that is a compensated transfer.
An uncompensated transfer is most commonly a gift from you to someone else. If you took that same $30,000 car and sold it to your son for $1,000, you would have an uncompensated transfer of $29,000. That amount would be penalized by Medicaid rules, while the compensated transfer, the act of buying the car, would not.
So what do you do with assets that need to be spent down? Each couple will have unique needs and options that an experienced elder law attorney will help plan for, but some basic examples include:
- Household repairs/remodeling to meet the needs of the aging couple
- Buying a better car for the non-nursing home spouse
- Paying off debts
- Pre-paying for funerals
It is very important to remember that once a Medicaid application is filled out, the only acceptable spend downs are those related to the cost of medical care. Because of this, Medicaid planning must begin before the application is filed.
