While Medicaid finances most long-term care in this country, Medicaid is supposed to be “the payer of last resort” when it comes to long-term care. Medicaid pays for long-term care only for those who are poor or who have become poor after paying for medical expenses or nursing homes.
Many people try to give away their assets to relatives in order to qualify for Medicaid. But when an applicant gives away property within five years of applying for Medicaid coverage of long-term care, Medicaid presumes that the gifts were made to qualify for Medicaid. This will trigger a period of ineligibility for Medicaid long-term care benefits on the theory that those assets could have been used to pay for the individual’s care.
Step By Step Instructions To Transfer Assets To Get Medicaid
You must use these step by step instructions to transfer assets to get Medicaid when you know that you simply cannot get approved with the assets that you have. You must first clear out your bank accounts to hold only your work income. Any residual income that you have must be sent somewhere else if it is over the limit for Medicaid, and you will find that you must sell stocks or release assets to a third party. You could sell your portfolio to someone else, or you could sign power of attorney over to someone who will hold the funds for you.
Check Your Tax Records
You should transfer your assets to someone who is not on your tax records for that year. You cannot submit a tax form that lists that person as a dependent because they will technically count their assets as your assets. It is difficult for you to complete an application when you have not moved your money far enough from your person or your own tax liability.
Save Your Records
You can safely transfer assets to get Medicaid, but you must keep your records. You might not need Medicaid in a couple of years, and you will find that you need these records so that you can get your money back. These records will show the paper trail that leads from your bank account to the person who is helping you out. You could have your properties signed back into your name, and your portfolio could be signed back over to you. You might need records if you wish to purchase your home back from someone else, or you could use these records when you need to take over a rental property.
You cannot get long-term care through Medicaid quickly, and you must plan ahead to get your assets moved. Making this is a process that lasts several months in order to be sure that you have done everything correctly. People who do this job incorrectly typically are denied by Medicaid, and it becomes difficult for you to try over and over again. You want to get it right the first time, and you want to have people lined up who will take on your assets for you.
How Long Does Your Long-Term Care Last?
Your long-term care could last for a year, or you could do this for much longer depending on your medical condition. You must have an understanding of how long the process lasts so that you are not concerned about what the costs will be. You must have an agreement in place with the people who helped you, and you must ask them if they have any concerns about tax liability. You will be approved by Medicaid if you do this correctly, but you might have problems on the back end if you have not planned with your friends and family in the right way. Planning preventing hold-ups in the future.
Assets That Can Be Transferred Without Penalty
When determining eligibility, not all resources are considered available to be used for the applicant’s care. Some examples include household goods and personal effects, one automobile (depending upon state laws and the marital status of the applicant), certain pre-paid funeral plans, and property used for self-support, such as income-producing property or property used in a business. If all of the conditions contained in state and federal laws are met, these assets do not have to be liquidated to pay for the Medicaid applicant’s long-term care. For that reason, federal and state laws generally allow for the gifting of those assets to others for little or no compensation. While the applicant’s primary residence isn’t usually considered available to pay for the applicant’s care (subject to specific conditions, discussed below), Medicaid laws do not allow for the applicant’s house to be gifted to others without penalty.
The Home: Medicaid Rules
Noncountable asset. The home of the applicant is subject to very special rules established in both state and federal Medicaid law. As a general rule, a home is exempt (that is, it doesn’t count toward Medicaid’s asset limit and Medicaid does not require it to be sold to pay for long-term care) if all of the following conditions are met:
- It is occupied by the applicant and/or the applicant’s spouse.
- The total equity value is less than $543,000 ($814,000 in some states, including California, New York, and Connecticut), and
- The title must usually be held in the name of the applicant and/or the applicant’s spouse.
In most cases, the house cannot be gifted to someone without penalty (since the home exemption requires the applicant or the applicant’s spouse to live in and own the house). But there are exceptions to this rule. Under federal law, when title to the applicant’s home is transferred to another, this will trigger a period of ineligibility for Medicaid coverage of long-term care unless the transfer is made to one of the following individuals:
- The spouse of the applicant
- A child of the applicant who is under age 21
- A child of the applicant who is blind or permanently and totally disabled
- The sibling of the applicant who has an equity interest in the home and who has been residing in the home for a period of at least one year immediately before the date the applicant becomes institutionalized, or
- A son or daughter of the applicant (other than a child as described above) who has been residing in the home for at least two years immediately before the date the applicant becomes institutionalized, and who (as determined by the state) provided the applicant with care, which permitted the applicant to reside at home rather than in an institution or facility.
In other words, the Medicaid applicant can gift his or her house to anyone in the above circumstances during the five-year look-back period without penalty.
You Can Keep Your Home
Your home is not considered a liquid asset because you must live there. You will find that you could stay anywhere you want, but you must relieve yourself or all rental properties that might provide you with income. These things turn up on your tax forms at the end of the year, and you must have a way of moving these taxable items to someone else. You could sell the properties to someone, or you could allow someone else to take them over. You must not derive any longterm income from these properties, and you must not have them on your tax return when you are applying for care.
Liens On The Home
In some cases, even though the house was a non-countable asset for Medicaid eligibility purposes, Medicaid can put a lien on the house and try to recover costs from the sale of the house after the nursing home resident dies. For more information, see our article on Medicaid estate recovery.
You Could Keep Your Job
There are instances in which you can keep your job, but you must consider what you will do so that you are not over the income limit. You might need to change your hours, or you could figure out what your best option is when you are trying to reduce your salary. Ask your company to work with you so that you can keep your job. If you quit your job, you must report that you are no longer employed. A company that is willing to work with you cannot give you any bonuses or stocks because they will count against your income. You must ask the company if they will not send any extra payments to you, and you cannot work overtime where your hourly rate rises.
Transfers For The Benefit Of The Spouse
Transfers to a spouse are not penalized by Medicaid because assets held in the name of either spouse are included when determining an applicant’s eligibility. In other words, Medicaid does not care which spouse owns the asset. Federal law provides that there is no transfer penalty if:
- The asset was transferred to the applicant’s spouse, or to another for the sole benefit of the applicant’s spouse, or
- The asset was transferred from the applicant’s spouse to another for the sole benefit of the applicant’s spouse.
This means that an institutionalized spouse (the spouse who is living in a nursing home) is allowed to transfer unlimited assets to his or her spouse, or to someone else for the sole benefit of his or her spouse (such as to a trust or annuity company). “Sole benefit of the spouse” means that no one besides the spouse can benefit from the assets in any way, now or at any time in the future.
Time Frame Set By Federal Law
Also, federal law states that any assets transferred to another “for the sole benefit of the spouse” must be spent for the benefit of the spouse within a time-frame corresponding to the spouse’s life expectancy. In other words, the trust or annuity must be to set up to spend the assets or money for the spouse’s needs in a way that it will run out by the time the spouse dies. This is particularly applicable when an annuity is purchased by the applicant’s spouse to pay out in a series of monthly payments to that spouse. These “Medicaid Annuities” have a number of specific rules that must be complied with, so be sure to seek competent advice from an elder law attorney familiar with these rules before purchasing one.
Transfers to a Child
A Medicaid applicant can transfer any resources (including a house, as discussed above) to a disabled child without running afoul of the transfer rules. No transfer penalties will be imposed when an asset was transferred to the applicant’s child, or to a trust established solely for the benefit of the applicant’s child, as long as the child is either blind or permanently and totally disabled as defined by the individual state program or as defined by Supplemental Security Income rules.
Undue Hardship Exception
In the event a Medicaid applicant made a transfer resulting in a period of ineligibility, there may be a chance you can convince Medicaid that the ineligibility for Medicaid long-term care coverage will result in an undue hardship. This will not be an easy task, however, because undue hardship is defined in federal law as depriving the person of medical care that endangers life. In other words, the applicant would have to prove that he or she couldn’t afford a nursing home without Medicaid, and that, without a nursing home, the applicant might die. In addition, each state has its own rules surrounding undue hardship.
Why Are You Transferring Assets?
You must learn how to safely transfer assets to get Medicaid so that your records will be clean when your application is submitted. You will find that step by step instructions to transfer assets to get Medicaid to help you move your money successfully, and you can submit your application once again. The purpose of following this process is to save money, get on a plan that pays for everything and helps you get into the facility that is best for you and your family. You must transfer your assets safely when it is time to apply for your long-term care. You could find a way to move all your money, property, and other assets so that you will be approved, and you could have them moved back if you ever get out of long-term care. Make certain that you can trust the people who will help you do this, and remember that these people are taking on your tax liability until your long-term care is over.