My Dad Is on Medicaid. Can I Buy His Jointly Owned Vehicles?

What You Need to Know

It’s wise to be cautious when planning to sell assets to family members, especially when Medicaid benefits are involved. Medicaid has strict rules about a person's financial resources, and the sale of assets can sometimes affect eligibility. Here’s a breakdown of how the sale of these four vehicles could impact your father’s Medicaid benefits.

Understanding Medicaid’s Asset Limits

Medicaid is a “means-tested” program. This means eligibility is based on a person’s income and assets (also called “countable resources”). The asset limit is typically very low, often around $2,000 for an individual. Certain assets, however, are considered “exempt” and do not count toward this limit.

How Vehicles are Treated Under Medicaid Rules

Generally, one vehicle is considered an exempt asset, regardless of its value. This is typically the primary vehicle used for transportation. In your parents’ case, the everyday vehicle used by your mother would likely be considered this exempt vehicle.

The other four vehicles, however, are considered “nonexempt or “countable assets.” Even though they are not currently running, they still have a value. Selling these vehicles and receiving money in return could increase your father’s countable assets.

The Impact of the Sale on Your Father’s Benefits

The key issue is what happens to the money from the sale.

• If your father receives the money: The proceeds from the sale would be added to his assets. If this amount, combined with his other countable assets, pushes him over the asset limit (e.g., $2,000), he could lose his Medicaid eligibility. To regain eligibility, he would need to “spend down” the money on approved expenses, such as medical bills or home modifications.
• Joint ownership and spousal impoverishment: Because the vehicles are jointly owned by your parents, the situation is more complex. When one spouse is on Medicaid, there are special rules to prevent the other, non-Medicaid spouse from becoming impoverished. The proceeds from the sale would be subject to the asset limits for both your father and your mother.

Recommendations and Cautions

1. Get a professional appraisal. Paying “fair market value” is crucial. Medicaid looks at whether assets were sold for less than their value, which is considered a “transfer of assets.” If the sale is deemed a transfer of assets for less than fair market value, it could result in a penalty period where your father would be ineligible for Medicaid benefits for a certain period.
    
2. Consult with a Medicaid planning attorney in your parents’ area. This is the most important step. An experienced elder law or Medicaid planning attorney can review your specific situation and provide guidance tailored to your state’s rules. They can advise you on the best way to structure the sale to minimize any negative impact on your father’s benefits.
    
3. Explore spousal protections. A Medicaid attorney can also help you understand strategies that may be available to protect your mother’s portion of the assets while maintaining your father’s eligibility.

Disclaimer: This information is for educational purposes only and is not legal advice. The laws regarding Medicaid are complex and vary by state. You should consult with a qualified legal professional to discuss your specific circumstances.