Massachusetts Asset Protection Lawyers
Medicaid imposes an ineligibility period if an applicant or their spouse gives away assets prior to entering a nursing home. This is true regardless of the kind of asset is given away and regardless of the value. The Medicaid transfer rules are complicated and confusing. Without proper advice, you can inadvertently cause yourself to be ineligible for many years. At Machado & Carden, we pride ourselves on offering comprehensive advice and guidance regarding the transfer of assets and Medicaid eligibility.
The lookback period: Understanding what is required when applying for Medicaid
Medicaid applicants are required to disclose all financial records for the past five years, called the "lookback period." A recipient is required to list and verify all transfer of assets made during the lookback period as well. The applicant is ineligible for benefits until the penalty period has expired.
The length of the penalty period is calculated using a penalty divisor determined by MassHealth, based on the average monthly cost of nursing homes in Massachusetts. The penalty divisor increases annually to reflect the change in nursing home rates. The current penalty divisor is approximately $8,000 per month. If one transfers $100,000, he or she is ineligible for Medicaid coverage for approximately thirteen months ($100,000 ÷ $8,000 = 13.02). The Deficit Reduction Act of 2005 states that this ineligibility period begins when the applicant is "otherwise eligible" for Medicaid. Applicants are "otherwise eligible" if they meet three requirements: 1) they must reduce their assets below $2,000; 2) they must require a nursing home level of care; and 3) they apply for MassHealth and receive a denial notice. The new law does not apply to transfers made prior to February 8, 2006.
Exceptions to the Medicaid Asset Transfer Rules
It is important to be aware of the many exceptions to the transfer of asset rules. Transferring assets to certain recipients will not trigger a penalty period. These recipients include: (1) a spouse; (2) a blind or disabled child; (3) a trust for the benefit of a blind or disabled child; and (4) a trust for the benefit of a disabled individual under age 65 even for the benefit of the applicant under certain circumstances). Special rules apply with respect to the transfer of a home.
In addition to the ability transfer one's home to his or her spouse, a blind or disabled child, or into trust for the benefit of a disabled individual, the applicant may freely transfer his or her home to: (1) a child under age 21; (2) a sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home; or (3) a "caretaker child," defined as a child of the applicant who has lived in the house for at least two years prior to the applicant's institutionalization and who, during that period, provided such care that the applicant did not need to move to a nursing home.
It is especially important to work with a well-qualified elder law attorney if you are considering making gifts. Because Medicaid only considers transfers made during the five year lookback period, there is an effective cap of five years on the ineligibility period. However, without proper planning, the ineligibility period can extend far beyond five years. Machado & Carden can help you avoid this trap for the unwary.
Contact a Medicaid planning lawyer at our firm today to discuss your options for the transfer of assets.
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