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be careful because many of the methods applicants used in the past to transfer assets and avoid Medicaid penalties are no longer valid.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)

Earlier this month, an Ottawa County man was charged with more than 25 felonies and faces at least 30 years in prison for allegedly running a Ponzi scheme between 2010 and 2015.

Michigan Attorney General Bill Schuette filed the charges on June 7 against Scott Rookus of Jenison, a town near Grand Rapids. The AG alleges that between 2010 and 2013, Rookus solicited and obtained investments of about $1.5 million for his holdings company, New Haven Holdings. His customers, many of whom were senior citizens, were told that earnings from their investments would come from the profits of Rookus’ enterprises, the complaint said.

As is the crux of a Ponzi scheme, Rookus allegedly used money from newer investors to issue fraudulent returns to some investors in an effort to cover his tracks. It would appear that Rookus was the primary beneficiary of his investors’ holdings. He allegedly used the investor funds to pay personal expenses, like his children’s private school tuition and to retire tax liens against him. The scheme was only uncovered after Rookus filed for personal bankruptcy in March 2015 and his investors discovered they had lost everything. Schuette said he hopes the case will provide some “relief and repayment” for those affected.

The alleged perpetrator’s story is just a hyper-local version of what disgraced financier Bernie Madoff was able to accomplish, but over the course of decades and at a cost to investors of $20 billion. How can one protect themselves from falling prey to hucksters? It’s not just senior citizens who are at risk. Young and old alike can easily become a mark for a clever crook. The best defense against becoming a victim of financial fraud is to have the benefit of good counsel.

When looking to change your investment strategy or when making your estate plans, a good attorney is the best insurance money can buy. The smell test is sometimes passed more easily than we’d like to think. A good attorney should be able catch a noisome odor every day of the week.

For more information on how our Asset Protection and Estate Planning attorneys can help you from becoming a victim, call Resnick Law at (248) 642-5400.