Is Your NJ Business Exempt From Mandatory Spenddown to Qualify for Medicaid?

HNWApplying for Medicaid Long Term Care Benefits, Elder Law, Medicaid Eligibility and Asset Protection Planning

When the State considers an applicant’s eligibility for Medicaid, it meticulously examines the applicant’s finances to ensure that all resources are valued below the $2,000.00 limit. In order to fully determine whether an applicant is Medicaid eligible, the State considers all assets, including real estate, bank accounts, and liquid resources. Often families are torn between their need for Medicaid assistance for a family member and their ability to support themselves. Fortunately, federal regulations provide some limited help in situations where individuals and their spouses are up against the wall. If your Medicaid application has been denied because of excess “liquid resources” as part of a family business, an appeal may be in order.

According to 20 C.F.R. § 416.1220, property deemed “essential to self-support” is not counted towards the valuation of a Medicaid applicant’s resources. Such essential property is typically found in the form of real and personal property used in a trade or business, non-business income-producing property, and property used to produce goods or services essential to an individual’s daily activities. See 20 C.F.R. § 416.1220. Real and personal property used in a trade or business can include land, buildings or equipment necessary for a specific vocation. Non-business income-producing property is most easily defined as any real estate or land owned by an individual and their spouse that generates some sort of revenue.

While real estate in the nature of farmland seems easy to qualify for self-support, where does the State stand in regards to liquid resources necessary to support a trade on business? The law specifically states that “[l]iquid resources other than those used as part of a trade or business are not property essential to self-support.”  (emphasis added). See 20 C.F.R. § 416.1220. The important phrase here is “other than those”. That is to say, liquid resources related to a trade or business which is essential to self-support are excludable from Medicaid spend down. In a case recently presented to my office, the issue was whether an applicant’s business checking account should be considered a liquid resource used as part of their ongoing business since we deemed it was property essential to self-support.

One federal district court held that “liquid resources” used in trade or business can be considered excludable from the calculation of assets for Medicaid eligibility. The court quoted 20 C.F.R. § 416.1201(b), which defines “liquid resources” as encompassing “cash or other property which can be converted to cash within 20 days.”  See 20 C.F.R. § 416.1201(b). The statute clarifies that accounts held with a financial institution, such as savings and checking accounts, inter alia, are liquid resources.

Further, the Supreme Court of North Dakota applied 20 C.F.R. § 416.1220 to a case in which it was not the Medicaid applicant, but his spouse, who wholly owned a business.  The court read 20 C.F.R. § 416.1220 to say that, for the purposes of eligibility for the Supplemental Security Income (SSI) program, the statute “exempts property essential to self-support, including liquid resources used in conjunction with the operation of a trade or business.” Since Medicaid relies upon the definition of income under SSI, the court held that the applicant’s wife should have received a fairer opportunity to establish that her business accounts were distinct from their personal accounts and thus should have been excluded from consideration of benefits.

In sum, liquid resources, such as a business checking account, may be excluded upon a determination by the court that the account was maintained solely for the purpose of the business, which was essential for self-support.  Attempts to launch similar arguments must sufficiently provide that any business accounts with a financial institution were used solely for the purposes of running the business, a business which served as an essential means to provide self-support to the applicant and/or his eligible spouse.

To discuss your NJ Medicaid eligibility matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Medicaid Eligibility Attorney



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