Medicaid Transfer Penalty
This edition of the Koldin Law Center E-Newsletter continues a series about the Medicaid Transfer Penalty rules and the trap set for people who apply for Medicaid for nursing home care.
All prior newsletters are saved on our website. You can read them by clicking here.
In the previous newsletter, we used the following example:
Example: Husband entered a nursing home on August 1, 2021. The cost of nursing home care is $13,000 per month. He and his wife had combined life savings of $140,000 on the date he entered the nursing home. In May 2017, May 2018, and May 2019, they gifted $10,000 each to their son and daughter. The total gifts were $60,000 over this 3 year period.
Under this example, Husband can keep $15,900 (2021 figures). Wife can keep $74,820.
The previous newsletter explained that there would be a transfer penalty of 5.5 months running from the application date of December 2021 to mid May 2022 where Husband and Wife would need to spend approximately $71,000 from their remaining life savings before Medicaid coverage would begin.
The “Medicaid Transfer Penalty Trap” results from a transfer penalty period of ineligibility being imposed after your life savings has already been depleted down to the Medicaid eligibility levels of $15,900 and $74,820.
Return Transferred Funds
One method to avoid this “Medicaid Transfer Penalty Trap” is for the children to return the $60,000 back to Husband and Wife.
If the transfer is undone, then there won’t be a transfer penalty of ineligibility imposed and the “Medicaid Transfer Penalty Trap” won’t happen.
Problem: Transferred Funds Already Spent
In many cases, the children have used these gifts to cover their expenses and are not able to return the gifts. In this situation, to avoid the Medicaid Transfer Penalty Trap, asset preservation options that will be discussed in future newsletters in this series should be considered.
Problem: Transferred Funds Returned Too Late
The Medicaid Agency only credits the returned gifts prospectively and the return must be done before the Medicaid Agency issues a determination assessing the transfer penalty.
Using the above example where Husband applied for Medicaid in December 2021, while the application was being reviewed, the children returned the gifted funds in January 2022.
To be on safe side, the Medicaid application should be withdrawn to prevent the transfer penalty from being assessed. Once their life savings is back down to the Medicaid eligibility levels by paying nursing home bills or purchasing exempt items such as burials, a new application for Medicaid can be filed.
Best Outcome is to Return Transferred Funds Before Applying for Medicaid
If gifts are returned before applying for Medicaid, the transfer penalty can be avoided and steps can be taken to protect some or all of the life savings using techniques discussed in later newsletters in this series.
Steps must be taken to prevent this “Medicaid Transfer Penalty Trap” before you spend your life savings down to the Medicaid eligibility levels.
The next newsletters in this series will continue to discuss your options for how to avoid this “Medicaid Transfer Penalty Trap” if you are already in a nursing home or if you are already ill and nursing home care is becoming imminent.
The Koldin Law Center, P.C. is available to help. We assist families in protecting their life savings even when someone is already in a nursing home.
For more information about Medicaid, please see our website by clicking here.
At the Koldin Law Center, P.C., located in East Syracuse, New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. When the Koldin Law Center, P.C. handles a Medicaid case, we not only handle the entire application process, but we also review asset protection options with our clients. We review with our clients who are already in a Nursing Home options to protect some or all of their assets beyond merely establishing Medicaid eligibility. We do not charge a fee for the initial consultation. We welcome your children, family attorney, accountant, and/or financial planner to be present at the initial consultation.
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