Oil and Gas Royalties and Nursing Home Medicaid Eligibility

Your parent or spouse may receive oil and gas royalties from mineral rights. Many Texas families do. Eventually your parent or spouse may find themselves in a nursing home. Unless they can afford $5,000 or more every month, they will need to qualify for nursing home Medicaid benefits. If your loved one receives oil and gas royalties and needs to qualify for nursing home Medicaid then you need to know how the HHSC is going to treat those royalties before you make a costly mistake.

Are they income?

Are they assets?

Are they both?

What are mineral rights?

For Medicaid purposes, “mineral rights” are defined as the ownership interests in natural resources such as coal, oil or natural gas, which normally are extracted from the ground.

Are Mineral Rights an Asset?

Many people make the mistake of thinking that those oil and gas royalty checks are only income. They look and act like income. It is a monthly check after all. If this were correct, then you would only need to be concerned about the oil and gas income raising your income above the Medicaid eligibility limit or if you need a Miller Trust because of the excess income. However, this is not correct.

Our Texas Medicaid regulations provide unmistakably that the value of a person’s ownership of or interest in mineral rights is a resource. This means they count its value against the Medicaid resource eligibility limit.  They do this for married and un-married nursing home residents. They also do this even if the royalties are separate property.

Is There an Exemption?

There is a very narrow exemption available. If you qualify, you may be able to exempt oil and gas rights from the asset limit rules. However if the value of their equity exceeds $6,000 (as many do) then that exemption is not available.

Avoid Mistakes

Oil and Gas royalties demonstrate how critical it is you know how the HHSC treats income and asset issues. If you make a mistake or guess wrong then you could be faced with a few months of unpaid nursing home bills and the problems that go along with those unpaid bills. Speak with a Woodlands Medicaid Attorney today and get on track for asset protection and Medicaid eligibility for your parent or spouse.

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  1. We need a NH/Assisted living for my Father. He has oil royalties that likely exceed 6K. He has life insurance without cash value. The oil royalties are in litigation due to him taking a loan out at a bank and not paying. They get 60% until the debt is paid. I owe attorney fees when that deal is finalized. I am his legal guardian in Texas but we no longer live there. He was a victim of a romance scam and several years and all of his life savings is gone. However he has to pay the guardian attorney and he receives social security. How to keep the assets away from Medicaid at this point?

  2. We would need to discuss your father’s situation in more detail in order to answer your question. You can contact us at (832) 592-7913 Monday-Friday from 9:00 – 5:00. Is the royalty interest only from a lease he holds or does he own any underlying real estate interest?

  3. My sister put my father in a nursing home and then my sister became ill with Covid and died. I have done everything that I can to get these oil rights figured out. She had hired Allied Planning in Lubbock Texas and it has been a nightmare. He has been approved for Medicaid but he has to pay 200 dollars more than what his social security is. The oil rights were my Mom’s. When she died she left them to us girls. 3 of us. We signed the rights over to him so he would have some income to live on. My father was scammed out of a lot of money. He has nothing. The oil rights were passed down through the family from my great great grandmother I believe and they have been split so many different ways. Yet they are saying that he owns the entire rights I believe. My father wanted to sign them back over to me when we were going through this however Allied Planning said not to do it. They were ours to begin with. I don’t see why he can’t do that. He wants to just sign them over to me now, since my little sister doesn’t want to have anything to do with him. Any advice would be helpful. Can we do this to lower his payments? I cannot afford to pay my father’s other bills.

  4. If I follow your comment correctly you state you did sign the rights to the lease over to him to increase his income. If he owned the rights at the time of the application or now, then the income generated from the royalties is correctly part of his income.

    Any transfer from him now will be subject to Medicaid penalty rules. While they may have been your rights at an earlier point in time it appears they are currently his. Any time a Medicaid applicant or recipient transfers assets for less than fair value within 5 years of receiving benefits it is subject to Medicaid penalty treatment.

    As for Allied Planning, everyone should be aware they are aligned with the nursing homes and may have conflict of interest issues when it comes to asset protections for individual families. If they gave you advice and you are not clear on it they should be able to explain it to you. I do not know what they told you or why they told you what they did.

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