If a person becomes ill and requires nursing home care, one of the most important assets to protect is the family-owned business.

1. The New Jersey Regulation. The New Jersey Regulation is found at N.J.A.C. 10:71-4(b)5. Under this regulation non-home property used in a business is excluded from resources when the equity does not exceed $6,000 and the activity produces a net annual return of at least 6 percent of the excludable equity value. In addition, tools and equipment required for employment are non-countable resources. This regulation was adopted in 1990 and was based on federal law in effect at that time.

2. Current Federal Law. The federal law supersedes state law. In 1990 the Social Security Act was amended to provide for an exemption of all income-producing property used in a trade or business. P.L. 101-239, 103 Stat. 2465 (amending 42 U.S.C. '3282b(a)(3)). This new amendment applies to SSI states. New Jersey bases Medicaid eligibility on SSI eligibility criteria. The effective date of the federal law is May 1, 1990. There are no federal regulations pursuant to this amendment. However, guidance can be found in the Social Security Administration Program Operations Manual System (POMS) which have been adjusted to reflect the changes in federal law. The requirements for property to be non-countable under the business property exception are as follows:

2.1. One Year Requirement - The business must have been in existence for at least one year or there is a presumption that it is not a valid business. POMS SI 01130.501C.

2.2. Current Use Requirement - The property must be in current use in the activity that qualifies for the exemption. If the property is not in current use, it qualifies only if it previously had been in use and can be reasonably expected to return to use within 12 months of its last use. POMS SI 01130.504. If the use is not resumed, the resource becomes countable one month after the 12-month period expires. Id.

2.3. What Is Excluded.

$ The business itself is excluded. Examples include farms, retail stores, taverns and commercial fishing boats.
$ Any real estate used in connection with the business is excluded.
$ Any vehicles used for transportation of goods, such as trucks, are excluded.
$ Inventory and equipment is excluded.
$ Liquid resources used in connection with a trade or business is excluded. There is no limit. This includes business bank accounts.

3. Non-Business Incoming-Producing Property. Rules for non-business income-producing property are very similar to the old federal law on business income-producing property. This will include rental property, such as rental and real estate. Up to $6,000 of the equity value of non-business income-producing property is excluded from countable resources, if the property produces a net annual return equal to at least 6 percent of the excluded equity. POMS SI 01130.503A.

4. Estate Recovery. While the business income-producing property or non-business income-producing property is a non-countable resource for Medicaid eligibility purposes, it may be subject to estate recovery. N.J.S.A. 30:4D-7.2. However, the Institutionalized Spouse can transfer the asset to the Community Spouse to avoid estate recovery. Such transfers are not subject to a Medicaid transfer penalty.