Maryland Medicaid Planning Guide

Introduction

Maryland is generally quite hostile to Medicaid planning, and its application process is extremely daunting and strict, requiring in all cases a full 5 years of financial records. Maryland also has a very aggressive estate recovery system, even allowing for lifetime liens to be placed on real estate. For those in the DC Metro area, it is much better to move to a nursing home in Virginia or DC if the goal is to protect assets.

Numbers at a Glance

Divestment Penalty Divisors (updated July 1, 2020)

Maryland Penalty Divisor: $9,673

Individual Resource Allowance

MD: $2,500

Married Couple Resource Allowance

MD: $2,500.00

Monthly Personal Income Allowance for Nursing Home Residents

MD: $82

Shelter Standard

MD: $646.50

Standard Utility Allowance

MD: $420

Medicaid Home Equity Cap

MD: $595,000

Community Spouse Resource Allowance

Minimum Community Spouse Resource Allowance: $25,728

Maximum Community Spouse Resource Allowance: $128,640

Community Spouse Monthly Maintenance Needs Allowance

Minimum Monthly Maintenance Needs Allowance: $2,155

Maximum Monthly Maintenance Needs Allowance: $3,216

Treatment of the Primary Residence

Maryland temporarily exempts the principal residence if lived in by a spouse, disabled child, or financially or medically dependent relative, or if the institutionalized owner “intends to return” to the home sometime.  

This temporary exemption of the home is effectively nullified by longstanding use of Medicaid liens which permit the State to recover back whatever it paid for the person’s care on the sale of their former home, if not lived in by a spouse or disabled child. Maryland also has a well-organized and effective estate recovery program. However, both the liens and estate recovery are not as a practical matter very effective on out-of-state former homes.

Deeds that convey real property retaining a “life estate with full powers,” sometimes called “lady bird deeds,” can be used in Maryland and can sometimes be used for avoiding liens and estate recovery for married individuals. However, Maryland does not permit their use when “intent to return” is the only basis for exempting the home, which is the case most of the time.

Protections for the Community Spouse

Community Spouse Resource Allowance (CSRA)

When one spouse becomes institutionalized, regardless of how assets are titled, a married couple’s countable assets are divided into equal halves. One half is allocated to the institutionalized spouse and it must be spent down (or protected) until only the Individual Resource Allowance remains. At that time, the institutionalized spouse will qualify for Medicaid. However, the other half of the countable assets is allocated to the community spouse, who is allowed to retain these assets up to the maximum Community Spouse Resource Allowance. Fortunately, with the advice of an experienced elder law attorney, you can almost always protect all of the assets of a married couple through a combination of various Medicaid asset protection strategies. 

Community Spouse Monthly Income Allowance

The Community Spouse may also be allowed to retain a portion of the institutionalized spouse’s income under certain circumstances. For purposes of this calculation, Maryland designates a minimum monthly maintenance needs allowance (the MMMNA).  If the community spouse’s income is less than the MMMNA, the institutionalized spouse is allowed to transfer the difference to the community spouse. This amount is increased by the excess shelter allowance, which is based on the difference between the community spouse’s household related expenses (rent, mortgage, insurance, taxes, HOA fees, excess utility fees, etc.) and the designated shelter standard. The total amount transferred to the Community Spouse is known as the Community Spouse Monthly Income Allowance. Keep in mind that the community spouse’s income (including the Community Spouse Monthly Income Allowance) may never exceed the maximum monthly maintenance needs allowance, which is a separate figure designated annually. An experienced elder law attorney can help you transfer as much income as possible to the community spouse.

Spousal Refusal

Maryland Medicaid very seldom permits spousal refusal, which involves the State disregarding all of the assets of the Community Spouse subject to the Community Spouse assigning all support rights to the State.

Annuities

Prior to February 8, 2006: Annuities issued prior to February 8, 2006 are treated as a countable resource if the annuity can be surrendered. The countable value of the annuity is equal to the value of funds in the annuity reduced by fees associated with surrendering the annuity. 

Prior to February 8, 2006: A non-employment related annuity purchased by or for an individual on or after February 8, 2006, using that individual’s assets will be considered an available resource unless the annuity is irrevocable, non-assignable, actuarially sound, and provides for payments in equal amounts during the term of the annuity with no deferral and no balloon payments made. Any annuity purchased by the institutionalized individual or a community spouse on or after February 8, 2006, must name the State of Maryland as the primary beneficiary for at least the total amount of medical assistance paid on behalf of the institutionalized individual. If there is a community spouse or minor or disabled child, the State must be named as the remainder beneficiary after the spouse or minor or disabled child.

Transfer Rules Relating to Annuities

Prior to February 8, 2006: If the expected return on the annuity is proportionate to the institutionalized individual’s reasonably estimated life expectancy, the annuity will be deemed actuarially sound and its acquisition will be deemed a transfer of assets for fair market value.

After February 8, 2006: An annuity purchased by an institutionalized individual or the community spouse on or after February 8, 2006, will be deemed an uncompensated transfer unless the State of Maryland is designated as the remainder beneficiary in the first position for the total amount of medical assistance paid on behalf of the institutionalized individual.Furthermore, any annuity bought by the institutionalized individual on or after February 8, 2006, will be deemed an uncompensated transfer unless the annuity is of a kind listed in one of the relevant subsections of section 408 of the Internal Revenue Code (IRC).Finally, any annuity purchased by the institutionalized individual on or after February 8, 2006, will be deemed an uncompensated transfer unless the annuity is both irrevocable and non-assignable; actuarially sound; and provides for equal payments with no deferral and no balloon payments. 

Estate Recovery

The state of Maryland will place a lien on the Medicaid beneficiary’s residence if the beneficiary is not expected to return home within six months. The state will assert the lien if the property is sold during the beneficiary’s lifetime or from the beneficiary’s estate. It will not assert the lien if the beneficiary’s spouse or disabled child is residing in the property, or in the rare case when the state accepts a claim of hardship.

The state will also recover from the Medicaid beneficiary’s estate those payments made for long-term care services. Estate recovery is limited to persons who were 55 years or older when receiving Medicaid.

Unfortunately, there is almost no way to defeat Estate Recovery in Maryland, which is in large part why Maryland is a very unattractive state in which to receive nursing home care from a Medicaid Asset Protection perspective.

Relevant Federal and State Statutes, Regulations, and Rules

1. Social Security Act Title XIX, 42 USC § 1396 et seq.

2. 42 USC § 1396p (transfer of assets / estate recovery / trusts).

3. 42 USC § 1396r-5 (special rules applicable to an institutionalized spouse who has a "community spouse").

4. Deficit Reduction Act of 2005, Pub. L. No. 109-171 ("DRA"), signed into law on February 8, 2006. The provisions of DRA dealing with the changes to eligibility for Medicaid long-term care are contained at §§ 6011 - 6021, and 6036 of the DRA.

5. 42 CFR 430 et seq.

6. Maryland’s Medicaid Rules and Regulations are set forth in the Maryland Regulations at http://mdrules.elaws.us/comar/10.09.24, and the Medicaid Policy Manual at https://mmcp.health.maryland.gov/Medicaid%20Manual/Forms/AllItems.aspx