Medicaid is one of the most highly sought-after government assistance programs. Those with Medicaid coverage can have medical treatment and long-term care costs covered, leaving them responsible for only a small portion of total costs. While available for a range of individuals, the elderly are some of the greatest Medicaid benefactors as it can cover expenses for everything from nursing home care to prescription drugs.
Given its advantages, there's a constant influx of Medicaid applications at local offices. However, Medicaid is only intended for those who cannot otherwise afford medical coverage, meaning that those with highly valued assets can be deemed ineligible. To help improve their chances of approval, many people choose to spend-down assets by virtually giving away property like homes and vehicles to family members and loved ones. Although this is something that can cause difficulties with Medicaid approval, there are ways that individuals can transfer assets and avoid the dreaded Medicaid penalty period.
Medicaid's Asset Transfer Rules & Penalties
To qualify for Medicaid, you could not have recently transferred assets without having received fair value in return. Medicaid officials want to avoid the possibility of someone being able to move into a nursing home today, transfer all assets to their children tomorrow, and qualify for Medicaid by the end of the week. To deter such behavior, they have implemented a penalty period for those who transfer assets without receiving fair value for the assets.
The penalty period is a time frame in which one will be ineligible for Medicaid. The length of the period is determined by dividing the amount transferred by the monthly average private pay cost of a nursing home in the State. In Wisconsin, that is roughly $9,000. So, let's say you give away property worth $216,000. Using round numbers, you'll be ineligible for Medicaid for roughly 24 months ($216,000 / $9,000 = 24). Another way to look at it is by saying that you'll be ineligible for Medicaid for one month for every $9,000 transferred.
It's crucial to know that these rules only apply to transfers made within the lookback period (5 years before applying for Medicaid). Any transfers made before then aren't inspected, but that does not mean that all transfers during the lookback period will result in Medicaid ineligibility. There are a few exemptions that allow a transfer of highly-valued assets without being penalized.
How Can I Avoid Medicaid Penalties for Transferring a Home?
There are special considerations when dealing with the transfer of homes during the lookback period. Medicaid allows for asset transfers to a few exempt individuals. Transferring home-ownership to any of the following individuals during the lookback period is permitted without the imposition of a penalty period:
- A child under 21-years-old who is blind or disabled
- A “caretaker child” which is someone who had lived in the house for at least two years before the applicant was admitted to a nursing home and provided care to the applicant to avoid nursing home stay
- A spouse of the applicant
- A sibling who has resided in the house in the year before the applicant was admitted to a nursing home and holds equity in the home
- A trust for a disabled individual under 65 -year-old
Aside from homes, Medicaid applicants can transfer any type of asset to particular individuals during the lookback period and avoid penalty. These individuals include:
- A blind or disabled child
- A trust for the blind or disabled child
- A trust for a disabled individual under 65 years of age
- A spouse
Frequently Asked Questions (FAQs)
1. What is the Medicaid Lookback Period and How Does it Affect Asset Transfer?
The Medicaid Lookback Period is a five-year window before you apply for Medicaid during which any asset transfers you make are subject to review by Medicaid. If you transfer assets without receiving fair value in return during this period, Medicaid may impose a penalty period where you are ineligible for benefits.
2. Who Can I Transfer My Home To Without Incurring a Medicaid Penalty?
There are certain exempt individuals to whom you can transfer your home during the Lookback Period without incurring a Medicaid penalty. These include a child under 21 who is blind or disabled, a "caretaker child" who lived in your house for at least two years before you moved into a nursing home and provided care to prevent a nursing home stay, your spouse, a sibling with equity in the home who resided there a year before you moved to a nursing home, or a trust for a disabled individual under 65.
3. Can I Transfer Assets Other Than My Home Without Incurring a Penalty?
Yes, you can transfer certain other types of assets without incurring a Medicaid penalty, as long as they're transferred to specific individuals. These include a blind or disabled child, a trust for the blind or disabled child, a trust for a disabled individual under 65 years of age, or a spouse.
4. How is the Length of the Medicaid Penalty Period Determined?
The length of the Medicaid penalty period is determined by dividing the value of the assets transferred without receiving fair value in return by the average private pay cost of a nursing home in your state. For instance, in Wisconsin, this is roughly $9,000 per month. Therefore, if you transfer assets worth $216,000, you would be ineligible for Medicaid for approximately 24 months.
5. What Can I Do if I'm Unsure About Medicaid's Asset Transfer Rules?
If you're unsure about Medicaid's asset transfer rules and how they apply to your situation, it's recommended that you consult with a Medicaid planning attorney. These professionals are familiar with the complexities of Medicaid eligibility and can guide you through the process, ensuring you understand the rules and regulations and can make informed decisions.
Speak With a Medicaid Planning Attorney
The Medicaid application process is tricky and often has many loopholes that the average person is unlikely to be aware of. Rather than leaving your Medicaid eligibility up to chance, consult with a seasoned attorney who can help ensure that you gain access to the benefits you require.
The Milwaukee Medicaid planning attorneys at Heritage Law Office of Wisconsin are seasoned estate planning lawyers with years of experience helping potential Medicaid applicants qualify for coverage. We understand that without Medicaid, there's a great chance you won't be able to afford nursing home care and numerous other expenses. Our team is here to answer all questions and guide you through a successful Medicaid process. Contact us today at 414-253-8500 for a free case evaluation.