Medicaid Transfer Penalty Trap–Part 3
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 newsletters in this series, 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 newsletters 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.
Prove Transfer was Not Made to Deplete Life Savings to Qualify for Medicaid
Under the Medicaid law, any gifts you make within 5 years prior to applying for Medicaid coverage for Nursing Home costs are presumed to be for the purpose of depleting your life savings in order to qualify for Medicaid.
In order to avoid the imposition of a transfer penalty period of ineligibility, you must prove that the transfer (gift) was made exclusively for a purpose other than to qualify for Medicaid.
One test typically used by Medicaid Agencies to determine whether a gift was made exclusively for a purpose other than to qualify for Medicaid is whether nursing home care is foreseeable within 5 years from the date of the gift based on your health.
So, if you are not in good health and nursing home care was a likely possibility in your future, the Medicaid Agency would typically penalize any gifts you made regardless of whether you had a good explanation for why you made the gift.
Using the above example where Husband and Wife made $10,000 gifts to each child in 3 separate calendar years, one method to avoid the “Medicaid Transfer Penalty Trap” would be to show that these gifts were not made to deplete their life savings in order to qualify for Medicaid.
Risk of Medicaid Not Accepting Your Explanation of the Gifts
If Husband applies for Medicaid in December 2021 and relies on trying to prove that the gifts should not be penalized due to being for a purpose other than to qualify for Medicaid, and if this approach fails, a transfer penalty will be assessed and it will be too late to avoid the “Medicaid Transfer Penalty Trap.”
Once you decide to go with this “Explanation of Gifts” approach, you give up the ability to use other asset preservation methods to prevent or reduce this “Medicaid Transfer Penalty Trap.”
When the Koldin Law Center, P.C. meets with clients, we review the options, risks, and benefits of each method to prevent or reduce this “Medicaid Transfer Penalty Trap.”
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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