What are Medicaid’s Asset Transfer Rules?

Transferring one’s assets prior to applying for Medicaid can create several problems. The government does not want individuals transferring all of their assets to children and relatives in order to qualify for Medicaid. Thus, Congress has put in place rules and penalties for transferring assets.

Some transfers that are deemed inappropriate by Medicaid include refusing to take an inheritance that is left to you, adding a person’s name to an asset, selling an asset for less than its fair-market value, and purchasing non-Medicaid compliant annuities.

The penalty period is determined by dividing the amount transferred by the average private cost of a nursing home in your state, so determined by Medicaid.

When applying for Medicaid, individuals must disclose all transactions during a period of time called the “look-back period.” As of 2005, the Deficit Reduction Act increased this period from 3 to 5 years.

Recipients of financial transfers who are exempt from Medicaid penalties include a spouse, a disabled child, a trust for the benefit of a disabled child, and a trust for a disabled individual under 65. And exemptions also apply to the transfer of a home. You may transfer your home without the fear of penalties to your spouse, a child under the age of 21 who is disabled, a sibling who has lived in the home and holds an equity interest, and a “caretaker child.” A caretaker child is a child of the applicant who lived in the house for at least 2 years prior to the applicant’s nursing institutionalization and provided care for the applicant.

Please contact our office to schedule an initial consultation for any of your Medicaid Planning, Estate Planning, or Veterans Benefits needs.