Medicaid is a government program that helps various Americans with the cost of their medical needs if they qualify to receive assistance under the program. Elderly Americans who qualify may use Medicaid funds to pay for long term nursing home care and avoid having to pay for the cost of that out of their estates. Medicaid has limitations on the value of assets a person receiving Medicaid can own and still receive Medicaid, and therefore, some planning is necessary if a person is planning on using Medicaid to pay for long term care.
When receiving Medicaid as a senior, one of the requirements is that the recipient does not receive income or own assets over a certain amount. If a person has assets over the Medicaid asset limit, the person can spend down those assets in order to meet the eligibility requirement. For some people, the spending down may involve paying for nursing home costs or other medical care, others may try to meet the eligibility requirement by gifting away the assets to friends or family members.
Unfortunately, if these transfers or gifts are made within five years of filing for Medicaid, the person applying for assistance may face penalties or have the application denied. The applicant may also be deemed ineligible for Medicaid for a certain period of time. This five-year period is known as the look back period. There are certain steps that an applicant can take to ensure that gifts given during this period do not result in a penalty.
Homes that are owned and occupied by the Medicaid applicant or his spouse are not usually subject to the limitations on asset transfers. Transfers of assets to spouses also do not count because a spouse’s income is also considered in determining eligibility. Additionally, parents can transfer their home and other assets to children with disabilities or to trusts established for the benefit of those children. Transfers can also be made to an adult child who lives with the Medicaid applicant and provides care and assistance to the applicant.
There are additional ways to transfer assets without incurring penalties, and people with significant estates should speak to an experienced attorney to figure out the best approach. Applicants should be careful because many of the methods applicants used in the past to transfer assets and avoid Medicaid penalties are no longer valid.
Note that a penalty under Medicaid for gifts or transfers of assets during the look back period is different from tax penalties from the IRS. Even if the gifts given in a tax year fit within the gift allowance, the gift giver may still face a Medicaid penalty for simply making the gift.
Contact Us for Legal Assistance
If you are in the process of planning for your long term care and how the assets comprising your estate will be distributed to your heirs, you should speak with an experienced estate planning attorney to ensure that you and your heirs are not negatively affected by the plan you put in place to transfer assets. For a consultation to discuss your estate plan, contact Resnick Law, P.C., to talk to knowledgeable estate planning attorneys in Bloomfield Hills and Detroit, Michigan.
(image courtesy of Hush Naidoo)