The Shocking Mistakes People Make when Transferring Assets to Qualify for Medicaid
Transferring assets to qualify for Medicaid is a complicated endeavor. It’s challenging because rules vary state to state, some personal assets are counted while others are excluded, and there is also a ‘look-back’ rule to contend with. Trying to figure out all or the rules could give even the most diligent researcher a headache and you probably would rather spend time on other areas of life that are important to you. For this reason, we’ve outlined rules and mistakes surrounding transferring assets to qualify for Medicaid.
First, why even transfer property to qualify for Medicaid?
The program exists to help pay for long-term care, mainly nursing home care, for individuals who have exhausted all assets. Because benefits are controlled at the state level rules may vary in each state so you’ll need to double check with an elder law attorney or senior care specialist for specific requirements.
If you or your spouse require long term care, in order to qualify for Medicaid, you are expected to spend down a large percentage of your assets. Once you hit the program’s required limits, Medicaid benefits will kick in. Because of this, many individuals and families begin planning for long-term care well before it is required. A large portion of this planning involves protecting their life savings, property and other assets so they may still meet the standards required for Medicaid qualification.
If you or a spouse require nursing home care, you would transfer assets and property, wait for transaction to be complete so you qualify, apply for Medicaid benefits, get accepted, then enter nursing home.
Sounds easy right?
The state put legislation in place so you are penalized for transferring property to qualify for Medicaid benefits. Now, when you apply for benefits, you are subject to the ‘look-back’ rule.
What is the look-back and how does it affect me?
Since Medicaid is considered a last resort solution for individuals who have used all income to pay for care, the program assumes any property or assets transferred prior to applying for benefits was done so to avoid paying for care and to qualify. Therefore, anything that was transferred 60 months prior to applying for the programs is subject to penalties and an ineligibility period.
The penalty period of ineligibility is calculated by dividing the amount transferred by what is considered the average cost of nursing home care in the state you live in.
For Example: If your state’s average monthly cost of healthcare is $7,000, and you give away $42,000 in assets, you will be ineligible for 6 months.
($42,000/$7,000 = 6)
For this reason, transfers must be made with careful planning and you must be sure to understand all possible consequences of making the transfer. Before applying for benefits, it is recommended you speak with an elder law attorney or senior planning specialist.
Considerations before you transfer property for Medicaid Qualification
Do you have enough funds to pay for nursing home care during ineligibility?
Do you have enough in savings to maintain the lifestyle you or a spouse want?
If you do transfer property, there are a few items that are allowed.
Exempt transfers include the following:
Transferring money to a spouse (however, this may not always work because a portion of a spouse’s income is counted towards calculating eligibility).
Any transfers to your child who may be blind or disabled.
If you transfer your home to 1) your child who is under 21 years old, 2) your child who lived at your home for at least two years before you transferred to a nursing home and cared for you (which kept you from entering a nursing home), and 3) your sibling who lived in your home for at least one year and already has equity interest in the home.
As we mentioned before, there are a sea of rules to navigate when it comes to asset transfers for Medicaid eligibility. We advise you speak with an elder law attorney or senior planning specialist before you make any changes to your current affairs.
For more information: Contact Senior Care of Michigan below to speak with a Senior Planning Expert.