What resources are excluded for purposes of determining Medicaid eligibility?

The following is a cursory list of excluded resources in assessing a Medicaid applicant’s eligibility for Medicaid nursing home services:

1. Homestead residence. The applicant’s principal residence is an excluded resource provided the applicant intends to return home. It is not necessary for the Medicaid applicant to prove his or her intent to return home; all that is required is a signed and filed Form 1245, Statement of Intent to Return Home. Usually, the home must be located in Texas. If the applicant did not live in the home while having an ownership interest in the property, then the home cannot be excluded, unless the home is a replacement home purchased within three calendar months following the month of sale of the original home. In the case of a replacement home, only the home equity from the original home is excluded. There is a $543,000 home equity limit to this exclusion from resources (in 2014). Importantly, if the home is titled in the name of a revocable living trust, the home will be counted as a resource.

2. Real estate for sale. If reasonable efforts are being made to sell real property then the resource is exempt. Real property includes surface, mineral, undivided interests, and life estates and remainder interests.

3. Automobile. One automobile, regardless of value, is excluded.

4. Household goods and personal effects. Furniture, appliances, clothing and other items of regular household use or personal significance are excluded. Texas Health & Human Services Commission (HHSC) caseworkers are instructed against inquiring into an applicant’s household goods and personal effects unless the applicant states on the application that the total value of such items exceeds $500.

5. Burial spaces. Burial spaces for the Medicaid applicant, spouse, and immediate family are exempt for Medicaid eligibility purposes. Burial spaces include a burial plot, grave site, crypt, and mausoleum. Burial space items for the Medicaid applicant and spouse are also exempt. Burial space items are defined as “a casket, urn, niche or other repository customarily and traditionally used for the deceased’s bodily remains. The term also includes necessary and reasonable improvements or additions to these spaces, including but not limited to vaults, headstones, markers or plaques; burial containers (for example, for caskets); arrangements for the opening and closing of the grave site; and contracts for care and maintenance of the grave site.”

6. Irrevocable prepaid funeral plan. An irrevocable prepaid funeral plan for the Medicaid applicant and his or her spouse is an excluded resource regardless of value.

7. Burial funds. HHSC will exclude up to $1,500 per person for funds set aside and designated for the burial expenses of the Medicaid applicant and his or her spouse, reduced by the value of any irrevocable prepaid funeral plans and the face value of any excluded life insurance. Form 1252, Designation of Burial Funds is used to designate burial funds.

8. Term life insurance. Term life insurance has no cash value (i.e. it cannot the owner cannot borrow against or surrender the life insurance policy for cash). Therefore, term life insurance is not a countable resource regardless of the amount of the policy’s death benefit.

9. Other life insurance in certain situations. If the total face value of life insurance policies owned by the Medicaid applicant or spouse is $1,500 or less per person, HHSC does not consider the value of the life insurance as a resource.

10. Business property essential to self-support. Property essential to self-support that is used in a person’s trade or business is excluded from resources regardless of value or rate of return. Excludable business property is tangible business assets, including, but not limited to, land and buildings, equipment and supplies, inventory, livestock, motor vehicles and all liquid assets needed for the business. Personal property used in a person’s trade or business is also excluded from resources. Excluded personal property includes, but is not limited to, tools, safety equipment and uniforms. To be considered as an excludable resource, business property (including personal, business-related property) must be in current use in the person’s trade, business or employment. If the property is not in current use, HHSC excludes the property only if it has been previously used by the person, and if it is reasonable to expect that it will be used again. Importantly, if the business property is not directly owned by the Medicaid applicant or spouse (i.e. owned by a partnership, corporation or trust), the business property will not be excluded as a resource. Additionally, the income generated by the business activities should be reported on Schedule F (for a farm) or C (for another business) of IRS Form 1040.

11. Livestock. Livestock maintained as part of a trade or business or exclusively for home consumption is not counted as a resource; otherwise, the livestock’s current market value is a countable resource.

12. Retirement benefits. Retirement plans, such as 401(k) and 403(b) accounts, IRAs, and other qualified and non-qualified retirement plans, are countable resources. It does not matter whether the plan is in the name of the Medicaid applicant or the spouse. However, if the retirement plan is unavailable for withdrawal, the assets are excluded for Medicaid eligibility purposes. If funds can be made available only through a loan, termination of employment, or a hardship approved by the plan administrator, the funds are not considered available. HHSC does not require the ineligible spouse to terminate his or her employment, apply for a hardship, or take out a loan.

Other Frequently Asked Questions