Question: When they were working, my parents saved $50,000 for any major health expense they might have. Currently they live with me and only receive Social Security, which is not enough for them to live on their own. I would like to apply for Medicaid on their behalf so they can get some extra help. How can I protect their savings, which they may still need?
Answer: The rules differ so much from state to state that it can be difficult to advise you. In general, assuming your parents are 65 or older, if both are seeking Medicaid coverage, they must spend down their savings to $3,000 (this number may be different in some states). If only one is seeking coverage, the other may be able to keep all of the savings. Your parents can spend down by paying for whatever they need, including paying you fair market rent. They can also prepay for their funerals – admittedly a bit morbid. However, in most cases they cannot give their money away. Doing so could cause them to be ineligible for Medicaid for up to five years. But even this isn’t certain. While such a transfer penalty always applies to Medicaid in a nursing home, some states don’t apply it to Medicaid coverage while living in the community.