It’s almost common knowledge that Medicaid imposes a “five-year lookback” to identify gifts made by a Medicaid applicant. In most circumstances, if an individual who is applying for Medicaid has given away their assets within the last five years, Medicaid will penalize that individual, even if they are currently out of funds, by not paying the nursing home for a period of months determined by the size of the gift. (Generally speaking, for every $6,570 given away, Medicaid will impose a one-month penalty.)
But there are a number of permissible gifts incorporated into the Medicaid Act – some more well-known than others – which allow an individual seeking Medicaid to transfer assets out of their name without penalty.
Federal law permits an individual to transfer their home to:
- Their spouse
- A child under the age of 21
- A child who is blind or permanently and totally disabled
- A sibling who has an equity interest in the home and who was residing in the home for at least one year immediately before the applicant went to the nursing home
- A son or daughter who was residing in the home for two years immediately before the applicant went to nursing home and who provided care to the applicant which permitted the applicant to reside in the home, rather than the nursing home
Federal law permits an individual to transfer any other assets to:
- …or from their spouse or to another for the sole benefit of the spouse (an annuity, for instance)
- A trust established solely for the benefit of a child under the age of 21 or with a disability
- A trust established solely for the benefit of any individual under the age of 65 who is disabled
There are various policy pursuits that form the foundation of these exceptions to the improper transfer rule. In many cases, individuals in need of Medicaid can transfer all of their assets to a loved one without penalty. Understanding these exceptions should be a consideration in any long-term care plan.