Long-term Care, Part XIV (Exempt Transfers for Medicaid)

The Greatest Financial Risk for Seniors: Paying for

Long-term Care, Part XIV (Exempt Transfers for Medicaid)

Previous articles in this series discussed the Medicaid gifting rules and the effect that gifts can have on your Medicaid eligibility. Last month’s article concerned one way of getting money to a family member (using a Family Care Agreement) that would not create any delay in your Medicaid eligibility if you later needed to go into a nursing home. This article continues the discussion of exempt transfers – that is, gifts that have no effect on your Medicaid eligibility.

As everyone knows, you have to be impoverished before you can be eligible for Medicaid to pay for your nursing-home care. And, as nearly everyone also knows, you can’t become eligible immediately for Medicaid simply by giving all your assets away. In other words, being impoverished is a necessary but not a sufficient requirement for Medicaid eligibility. This is because you are required to disclose on your Medicaid application not only what assets you still have, but also any gifts you have made during the “look-back” period (currently five years – 60 months – prior to the date the application is filed).

The general rule for Medicaid is that any gifts made during the look-back period will create a period of time that you cannot be eligible for Medicaid. But there are certain transfers you can make that will not delay your Medicaid eligibility. Here are the most common:

• Gifts to a Blind or Disabled Child. Any gifts you make to a child who meets the Social Security definition of “blind” or “disabled” are exempt for Medicaid purposes. This gift can be in any form – money or other financial assets, real estate, a motor vehicle, etc. – and there is no limit on the amount that can be gifted.

Of course, there are other considerations to take into account in determining whether to make such a transfer. For example:

• • your child may have a drug or alcohol problem, or an intellectual disability, that prevents him or her from being able to handle money responsibility;
  • your child may be receiving certain government benefits (such as SSI or Medicaid) that require recipients to be impoverished, so that making a gift to that child might cause him or her to lose those benefits; and
  • there are certain unavoidable risks (such as debt, divorce and death) involved whenever you are transferring assets into someone else’s name.
• Gifts Involving Your House. In addition to a disabled child, transferring your house (or an interest in your house) to the following people would also be an exempt transfer for Medicaid purposes if you later need to enter a nursing home:
  • Sibling with Equity Interest. To a brother or sister who has an ownership interest in your house (that is, his or her name is on the deed) and has lived there for at least one year immediately prior to the date you enter a nursing home.
  • Caregiver Child. To one of your children who has:
    • lived in your house for at least two years immediately prior to the date you enter a nursing home,
    • provided you with care during that time, and
    • your doctor signs a form stating that had you not been receiving that child’s care, you would have needed to go into a nursing home at least two years sooner than you did.
• Minimal Gifts. Gifts that total no more than $500 in any one calendar month. This is not $500 per person, but $500 total in one month. And it doesn’t mean that the first $500 of any gift you make won’t count – if you gifted $501.00 in one month, the entire $501.00 would count, not just the $1.00.
  • As noted in previous articles, this Medicaid rule should not be confused with the federal annual gift-tax exclusion, currently $15,000 per person per year, as this tax rule only affects the wealthiest one-tenth of one percent of the population.^[1]

Next month’s article will continue this discussion of the Medicaid gifting rules by looking at the opposite of exempt transfers – that is, instead of transfers that you intended as gifts but do not affect your Medicaid eligibility, there can also be transfers that you never intended as gifts but might well affect your Medicaid eligibility.

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The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney

Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.

Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at schelly@losscaleselderlaw.com. The Law Offices of Schellart Joyce, LLC has an Internet presence at www.losscaleselderlaw.com.

1. The federal gift-tax exclusion is an example of the splendid impartiality of the tax system we have in our country, which gives every citizen – regardless of race, creed, or economic status – the right to give away $11.4 MILLION (or $22.8 MILLION for a married couple) without having to pay one nickel of gift tax during lifetime or one nickel of federal estate tax after death. ↑