Asset Transfers Related to Medicaid Qualification
Entering a nursing home is a decision few people consider lightly or happily, but it is one of the potential realities of growing older. Few can afford to pay the staggering costs of nursing home care without assistance, and most people turn to Medicaid to provide financial assistance to help cover this expense. However, qualifying for Medicaid is one of the most complicated processes a person will ever experience, and should be explored well before the need for this assistance program arises. Medicaid is intended to provide medical aid to those unable to afford regular medical care, and is financed by federal and State governments. As a result, a person must meet strict income requirements that essentially indicate they have no resources available to pay for the cost of a nursing home. These income limits can leave many people thinking they must deplete their entire net worth, leaving spouses and children with nothing for support or inheritance, but there are permissible ways to avoid attain eligibility to avoid this outcome. Certain transfers to specified individuals are allowed under Medicaid, and there are various other financial arrangements that are permissible. This enables a substantial portion of a person’s estate to be preserved while still achieving eligibility for Medicaid. A discussion of some options for how and when to transfer money and property out of one’s estate for purposes of Medicaid qualification will follow below.
Who Can Receive
Generally, any transfer made within the five years preceding an application for Medicaid for less than fair market value will be considered an unfair attempt to qualify for Medicaid, and result in a period of ineligibility for Medicaid. However, not all transfers trigger penalties, even if the compensation received in return is minimal. Transfers to the following individuals are exempt from triggering Medicaid ineligibility:
- blind or disabled children;
- trusts for the benefit of blind or disabled children; and
- trusts designated to solely benefit disabled individuals under age 65 (special needs trusts);
- pooled trusts
What Can Be Transferred
Transferring property in and of itself is not an issue, but transferring property for less than fair market value during the five year look-back period is when Medicaid applicants run into trouble. When assessing which assets to transfer, the first thing to look at is what assets are countable under Medicaid rules. A few examples of property that would not be considered when calculating a person’s assets include:
- household goods and personal items;
- one vehicle of any age, with a few exceptions, and additional vehicles more than 7 years old;
- pre-paid funeral plans, assuming the arrangement are irrevocable; and
- income-producing property, e., rental property or qualified annuity.
A Medicaid applicant’s homestead (principal residence) is another piece of property that is treated under different rules for qualification. Generally, homesteads are exempt and not part of the countable assets as long as the following are true:
- the applicant or the applicant’s spouse lives in the home;
- total equity in the home does not exceed $560,000; and
- title is held in the applicant’s and/or the spouse’s name.
In addition, Florida law places a high level of protection on homesteads, and will not permit creditors to force a sale of the home to pay off outstanding debts as long as the home is inherited by a spouse, children or other family heirs.
Transferring a homestead may be worth considering, but it can trigger penalties if the recipient is not one of the following:
- the applicant’s spouse;
- the applicant’s child under the age of 21;
- the applicant’s child who is blind or totally disabled; and
- the applicant’s sibling with an equity interest in the home, providing he/she lived in the home for the year preceding entry into a nursing home; and
- another child of the applicant who lived in the home for the previous two years in a caretaker function.
Applying and qualifying for Medicaid is not a straightforward process, and if done incorrectly can cost the applicant months or even years of program eligibility. Using an attorney to assist in the process gives you a much better opportunity to become eligible sooner, while protecting as many assets from liquidation as possible. Planning for Medicaid should occur early, and elder law attorney William Rambaum, P.A. has years of experience helping clients navigate this complicated program. Contact the Oldsmar office today to schedule an appointment.