As the need for affordable long-term care continues to rise, our elderly loved ones are looking for ways to get nursing home care and provide a financial future for their family. Many find comfort in the benefits that Medicaid offers, however some may find that gifting assets away can jeopardize their Medicaid long-term care coverage.
Medicaid Gifting Rules
Medicaid is a means-based assistance program. Through strict guidelines, it provides coverage to recipients whose assets total a minimum amount set by the state. In order to qualify for Medicaid, some seniors may find it beneficial to start giving away their assets to reduce the value of their estate. They would rather implement this ‘spend down’ method in order to get Medicaid care coverage than risk losing assets to pay for long-term care and be left with little to pass on to loved ones.
But Medicaid is a payer of last resort, meaning the program would rather recipients exhaust all other sources of payment for long-term care. Because of this, certain regulations have been put in place to prevent recipients giving away assets that could have been used to pay for care.
Look-Back and Transfer Penalties
Those regulations are delivered in the form of the Deficit Reduction Act of 2005 (DRA). This act imposes a period of ineligibility on Medicaid recipients who gave away assets within five years of applying for Medicaid benefits. There are two important components of this act: the look-back rule and transfer penalties.
Look-back rule- This is referring to the time during which the applicant’s state will look through past records to see if he or she has made a gift. This period of time used to be 3 years, however in 2006 the new look-back rule has increase to 5 years. In other words, gifts made within 5 years of applying for Medicaid long-term care benefits can affect eligibility.
Transfer Penalties- This is the time during which an applicant is unable to receive Medicaid long-term care benefits, if a transfer of assets is made within the look-back period. The length of time of the transfer penalty is calculated by dividing the value of all gifted assets by the average monthly cost of nursing care in the applicant’s state. The resulting number is the amount of months during which he or she is disqualified from receiving Medicaid support for long-term care costs. It is also known as a period of ineligibility.
Are there any exceptions?
If you are seeking Medicaid coverage for long-term care or if you’re already receiving benefits, you can find comfort knowing certain transfers are exempt from the look-back rule and transfer penalties. Here are a few of those exceptions:
- Transfers to a disabled child
- Transfer to a disabled individual who is under the age of 65
- Transfers to family members who are under the age of 21
- Transfers to a spouse
- Certain home transfer situations
Other exceptions may be applicable to your situation. Talk to an elder law attorney to determine what exemptions you may be eligible for.
Know the Options
Unfortunately, any transfer that you make can go under the microscope. Monetary gifts, purchases for others, charitable donations, and purchasing some types of annuities are all examples of transfers that can affect Medicaid eligibility.
The best practice when it comes to eligibility is to talk with an elder law attorney before making any transfer of assets. He or she can help you determine how to properly plan for long-term care while providing your family the financial support it needs.
Talk to the elder law attorneys at the Law Offices of Christina Lesher, PC today at (713) 529-5900 to discuss your Medicaid coverage needs.