Retirement Weekly: How do I protect my excess assets for Medicaid eligibility?

Yes for assets, possibly for income. There are a few different issues here. Medicaid has both asset and income limitations. The $2,000 limit to which you refer has to do with assets. Many state Medicaid programs, especially after age 65, impose a $2,000 asset limit. Fortunately, your Social Security Disability Income (SSDI) is not considered to be an asset during the month you receive it. So, if it pushes your bank account over $2,000 during the month you receive it, that’s not a problem as long as you spend it down before the end of the calendar month. If your account remains over $2,000 at the end of the month, that would then put you over the asset limit.

If you don’t have sufficient needs to spend the money down during the month, your STABLE account is an option for sheltering the excess funds. STABLE accounts are Ohio’s version of an ABLE account, created under the Achieving a Better Life Experience Act enacted by Congress in 2014 to enable individuals who became disabled before age 26 to shelter assets without having to set up a special needs trust. (The age limit will go up to 46 in 2026.) This can be especially important for beneficiaries who, like you, are over age 65, because after that age it can be more difficult to create a special needs trust.

The ABLE Act was enacted in part in response to two other aspects of current law. 

First, many parents and grandparents set aside educational funds in 525 accounts to help pay for college expenses for their children and grandchildren. The idea of ABLE accounts was to level the playing field, to permit them to set aside tax-sheltered funds for their children and grandchildren who are less likely to go to college.

Second, ABLE accounts also provide some relief for Medicaid and Supplemental Security Income (SSI) beneficiaries, like you, who are struggling to comply with the $2,000 asset limit which has remained unchanged since 1984. In an act of bipartisanship, Ohio senators Rob Portman and Sherrod Brown have introduced a bill, S.4102 – SSI Savings Penalty Elimination Act, to raise the asset limit for eligibility for beneficiaries of Supplemental Security Income (SSI) from $2,000 for individuals and $3,000 for married couples to $10,000 and $20,000, respectively, and to index it for inflation. Cumulative inflation since 1984 has been 186%, meaning that if this limit had been indexed for inflation it would now be $5,720. In effect, we’ve experienced a gradual 40-year reduction in the asset limit for SSI.

So, you can transfer your excess income to your STABLE account before the end of each month. This will solve your excess asset challenge. If you have excess income, that may be more complex. Different Medicaid programs have different limits on income and it can be difficult to shelter excess income. Some states do allow beneficiaries to shelter excess income in a type of pooled trust. I don’t know if you are facing income as well as asset limits or if Ohio permits the use of pooled disability trusts to shelter excess income. If you are facing an income limit, I recommend that you consult with a special needs planning attorney, whether through legal services or a private attorney. There are two good organizations of these, the Academy of Special Needs Planners (of which I am a co-founder) and the Special Needs Alliance.

Harry S. Margolis practices elder law, estate and special needs planning at Margolis Bloom & D’Agostino in Boston and Wellesley, Mass., and is the founder of ElderLawAnswers.com. He is author of The Baby Boomers Guide to Trusts: Your All-Purpose Estate Planning Tool and answers consumer questions about estate planning issues at www.AskHarry.info.