What are the Differences between Assets and Income?

There are many Medicaid programs, each with their own rules for qualification. This post describes the rules for Facility Medicaid eligibility in Iowa for the year 2020. Each year, DHS may adjust any dollar amounts listed below, so these figures are only accurate for the 2020 calendar year.

Often, what is considered income versus assets can be confusing, and the distinction is important when considering your Medicaid planning strategy. This article will cover the differences between the two, common examples of each, and exceptions to keep in mind.

Income is money a person receives for work or retirement. The most common example of income is Social Security; however, pensions, rental income, residual income, wages from a current employer, or profits from an owned business are also considered sources of income. 

Assets are anything with a value that can be sold or liquidated. Assets would include bank accounts, retirement accounts, investments, rights (life estate, land rights, oil rights, etc.), shares of family businesses or corporations, and property. Property includes houses, farms, or vehicles. Certain properties are considered exempt when applying for Medicaid and based on certain circumstances. We will discuss exempt assets in more detail in an upcoming post.

The above lists of sources of income and assets are not exhaustive, but hopefully they help give you direction for defining the differences between the two. There are exceptions to consider as well. An exception to keep in mind are instances where an asset produces income. For example, a contract for the sale of a house. The income received from the regular payments of the buyer would be income. In this case, the contract also has a value and is considered an asset because the contract can be sold to another person for a lump sum in exchange for the rights to the income from the contract. In this situation, when applying for Medicaid, DHS would count the income received from the property toward the applicant’s income limit as well as count the total gross value of the contract as an asset toward the applicant’s asset limit. Learn more about Medicaid asset and income limits here.

When planning out your finances for the future, keep the distinction between assets and income in mind. If you have any questions, reach out to us at (515)344-4284 for your free consultation, and we’d be happy to answer them. Don’t forget to follow our Facebook page for updates about even more informative content posted on our website.