Can you own a farm, ranch, or other business and qualify for Medicaid?
Many people believe their assets are too substantial for them to qualify for Medicaid. When enacted in 1965 along with Medicare, Medicaid was limited to people with very few assets. But Medicaid has evolved beyond its roots to cover many more people in need of health care services such as nursing home care (see https://www.wrightabshire.com/publications/medicaid-for-the-middle-class/). Approximately one in four Americans receive Medicaid services, and Medicaid truly is this country’s long-term care program. Nursing home care is paid for by individuals, with or without long-term care insurance, or by Medicaid.
To qualify for Medicaid long-term care services in Texas, in addition to citizenship, residency, and medical need requirements, a person’s income must be below a certain amount and their assets have to be below $2,000. However, certain assets don’t count against the $2,000 limit, and these include a farm, ranch, or other business, if the complex rules governing business property are met by the person applying for Medicaid.
In order for a ranch, farm, or other business property that is owned by a person applying for long-term care Medicaid, or owned by that person’s spouse, to be excluded from being counted against the asset cap, several requirements must be met.
First, the business property must be part of a valid trade or business that the person relies on for self-support. Second, the trade or business must be a current business. If it is not, the person applying for Medicaid benefits has to show that the business property was being used as part of a business and expects the business to continue operations.
Third, and most importantly, the Medicaid applicant or the applicant’s spouse must be actively participating in the business in order for the business property to be excluded. Assets used in hobbies or passive investment activities, even if the income generated is a significant portion of a person’s income, would not meet the Texas Medicaid requirements that would result in excluding the business property from the applicant’s countable assets. Active participation of a single or married person or a third person acting as their agent, includes such activities as making management decisions, overseeing production, and participating in production.
To show that there is a current and valid trade or business, the Medicaid applicant must provide documentation describing the farm, ranch, or other business, business assets, how long the business has been in operation, and whether there are owners other than the Medicaid applicant or applicant’s spouse.
To show that there is a current and valid trade or business that it is not passive investment property or a hobby, the Medicaid applicant has to provide tax returns. For example, a rancher or farmer with a currently operating ranch or farm would file a specific schedule (Schedule F) with his or her income tax return.
If the Medicaid agency determines that an applicant’s farm, ranch, or other business is a valid trade or business that meets all of the requirements in order to be excluded, examples of business property that would not be counted against the $2,000 resource limit include land, buildings, equipment and supplies, inventory, livestock, motor vehicles, and liquid assets needed for the operation of the business.
Medicaid planning can be a very complicated and challenging area of law, which is even more complex when a person seeking Medicaid has a farm, ranch, or other business. This type of planning should be handled by an attorney who specializes in the area.
You may visit our website at www.wrightabshire.com. Nothing contained in this publication should be considered as the rendering of legal advice to any person’s specific case but should be considered general information.