With an irrevocable trust, the grantor cannot change or revoke the trust as opposed to a revocable trust that can be changed. The dollar amount changes on an annual basis, and there is some variance to this exception dependent on one’s state of residence. Instead they only apply to nursing home care. a sibling having an equity interest in the home and who lived there for a minimum of a year before you entered a nursing home. It is strongly recommended that one consult with a Medicaid planning professional who understands the nuances between states. Common Mistakes and Violations. Also if, when the transfer was made,the applicant was already under the $2,000 asset limit, that will help as well. Annuities, also referred to as Medicaid Annuities or Medicaid Compliant Annuities, are a common way to avoid violating the Medicaid look-back period. (Assets that can be transferred via trusts include stocks, CDs, annuities, cash, and property.) Federal Medicaid regulations state that most asset transfers occurring within the five years prior to your application will subject you to a transfer penalty period, during which you will be ineligible for Medicaid. However, this page is only concerned with those Medicaid programs that are relevant to the elderly. Irrevocable trusts made during the look-back period are considered gifts. The average cost of private pay nursing home care in her state is $7,000 / month. POMS Manual Section 01150.122 describes when the Medicaid applicantâs home can be transferred to certain limited individuals as gifts within the look-back period without penalty: Spouse / Young Child / Disabled Child Home Gifting Exception: Title to the Medicaid-applicantâs home maybe deeded to their spouse, any child under the age of 21, or to any child of any age who is blind or disabled.Â, Sibling Home Transfer Exception:The home may be given to the Medicaid-applicantâs sibling if the sibling was residing in the Medicaid applicantâs home for at least one year prior to the Medicaid-applicantâs institutionalization (e.g. For example if an asset valued at $10,000 is gifted by a Medicaid applicant, and $7,000 is returned, then the penalty period of ineligibility would only be calculated based on a $3,000 transfer (as opposed to the full $10,000 transfer).Â, These transfer of asset / gifting rules are also set for thin the Florida ESS Policy Manual, Chapter 1600, concerning Assets.Â. ($40,000 gifted divided by $200 average daily cost = 200 days / 6.5 months). The rules governing the transfer of assets under fair market value do not extend to home care (also referred to as community care). And the look-back period does not necessarily play a role as an eligibility factor in all of them. If a medicaid applicant has transferred assets or resources for less than fair market value within the five-year look back period, POMSSI 01150.124 discusses the one sure fire way to avoid a Medicaid gifting penalty period of ineligibility: have the entire gifted resource returned. However, in reality, an applicant spouse can transfer unlimited assets to their non-applicant spouse without violating the look-back period. The remaining assets must be “spent down” until the individual in need of long-term care meets the asset limit for Medicaid qualification. But, as is often the case in the law, there are certain exceptions to this general rule concerning the Medicaid ineligibility period.Federal law sets forth certain situations when it is perfectly allowable to transfer assets / make gifts to third parties penalty free. Gifts Since the federal government permits U.S. citizens to gift money (as of 2020, as much as $15,000 / year per recipient) via the estate and gift tax exemption without paying tax on it, one may not realize that Medicaid does not consider the transaction to be exempt from the Medicaid look-back period. I was Chair of the Elder Law Section of the New York…. All information on this website is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. Learn more about irrevocable funeral trusts here. Please call to schedule a consultation and discuss strategies for how to qualify for Medicaid. All Rights Reserved, This is a BETA experience. You may opt-out by. But these excess assets can be used to pay for long-term care and the applicant can then reapply. This means the great aunt’s period of Medicaid ineligibility will be for 5 months ($35,000 / $7,000 = 5 months). The penalty divisor amount varies by state. I’m a founding partner of the law firm Littman Krooks LLP and chair of its’ elder law and special needs department. Adult Children CaregiversThe “Child Caregiver Exemption” is designed for adult children who live with the Medicaid applicants (their parents) for a minimum of two years prior to Medicaid application and serve as their primary caregivers. Gifting, in general, is problematic and these exceptions should not be relied upon without first obtaining guidance from an experienced elder law attorney. Medicaid will âlook backâ five year sand add up all the transfers to non-spouses (for no value or less than fair market value) and use that aggregate number to calculate a Medicaid penalty period of ineligibility.Â. Deferred annuities, which mean the investor chooses to delay payments until a specified period of time, are considered assets that can be used toward the cost of long-term care. Note, caregiver contracts may remain in effect even after the elderly individual enters a nursing home facility, with the caregiver serving as the advocate of the senior. Careful drafting of the contract (which is generally for the duration of the senior’s life) is imperative. Purchasing an annuity during the look-back period is not in violation of Medicaid’s rules. This is of particular relevance for assets on which the government has a record, such as with boats, motorcycles, or vehicles via registrations. In New York, a single applicant is allowed to retain $15,750 in liquid assets. The average daily cost for nursing home care in her state is $200. Debt PaymentsPaying off debts during the Medicaid Look-back Period is also exempt from violation. Some states may also allow for small gift exceptions. To clarify, view the table below. Thus, there is a sum of $35,000 that falls within this penalty time frame. To learn more about this exemption, click here. Proceed with caution. But when an applicant gives away property within five years of applying for Medicaid coverage of long-term care, Medicaid presumes that the gifts was made to qualify for Medicaid. It’s important to note that it is very difficult to be granted an Undue Hardship Waiver. Siblings A home can be transferred to a sibling should that brother or sister own a portion of the home (have equity in the home). In 49 of the 50 states, the length of the look-back period is 5 years (60 months). The Social Security POMS Manual Sections SI 01150.121 â SI 01150.126 explains the limited circumstances when gifts are allowable without penalty:Â, POMS Manual Section 01150.121 explains that transferring resources for less than fair market value does not apply to trusts if that trust is established for:Â, The sole benefit of the Medicaid applicantâs blind or disabled child (the child can be any age). Undue hardship means that the individual would be deprived of food and shelter if they were denied SSI payments. However, this is not the case. The penalty for violating the Medicaid look-back is a period of time that one is made ineligible for Medicaid. Lack of DocumentationEven if one sells an asset and receives a value equal to the fair market value, if they are unable to provide documentation of the transaction, they might be found in violation of the look-back period. This includes children who are legally blind. home and community based managed care waiver program, Medicaid applicantâs home may be gifted to their son or daughter. I also was a past president of the Special Needs Alliance, and former president of the National Academy of Elder Law Attorneys (NAELA). For instance, Pennsylvania allows individuals to give up to $500 total / month without being in violation of the Medicaid look-back period. This five-year period is commonly called the “look-back” period. Medicaid's “look-back” and “transfer penalty” rules are intended to keep Medicaid spending under control by preventing or minimizing asset transfers having the sole purpose of allowing one to qualify for the program. were gifted, transferred, or sold for less than the fair market value. With Irrevocable Funeral Trusts, a specific amount of money, which is limited by state, is set aside for the sole purpose of funeral and burial costs. That is to say the dollar amount that Medicaid uses as the average cost of nursing home care varies. This article explores exceptions that apply to some children of Medicaid recipients. This means the grandmother will be ineligible for Medicaid for 200 days or approximately 6.5 months. This can be done by paying off debt, making home modifications, or contributing towards the cost of long term care. Fortunately, there are many exceptions to the rules and exemptions made for families in difficult situations. Certain asset transfers do not incur a penalty. During the review, it was discovered that the fair market value of the home at the time of sale was $350,000. Phrased differently, a non-applicant spouse is permitted to retain up to $128,640 of the couple’s assets. For an elderly person to be eligible for nursing home care, assisted living, adult foster care, or in-home care from Medicaid, they must have limited income and assets. Opinions expressed by Forbes Contributors are their own. GiftsSince the federal government permits U.S. citizens to gift money (as of 2020, as much as $15,000 / year per recipient) via the estate and gift tax exemption without paying tax on it, one may not realize that Medicaid does not consider the transaction to be exempt from the Medicaid look-back period. A Medicaid applicant is penalized if assets (money, homes, cars, artwork, etc.) An applicant is permitted to transfer up to $128,640 (in 2020) to their spouse, given their spouse is not also applying for long-term care Medicaid and will continue to live independently in the community. The penalty period begins on the date that one becomes eligible for Medicaid, not the date that the transfer or gift resulting in penalization was made. An asset transfer occurring within the look-back period triggers a “transfer penalty,” a time period during which you are ineligible for Medicaid. Faced with the possibility of spending all their money on health care and leaving nothing for their heirs, they might be tempted to transfer everything they own to their heirs at once, qualify for Medicaid, and move into a nursing home. Medicaid is a combined federal and state program and, as such, so are the rules governing look-back periods. The result is the number of months during which you are ineligible for Medicaid. As a matter of public policy, Medicaid rules permit some gifts of money or property. One should take extra caution when hearing this phrase. I’m a founding partner of the law firm Littman Krooks LLP and chair of its’ elder law and special needs department. Our goal is to help families find the means to pay for senior care by providing objective information and interactive tools on our ad-free, easy-to-use and comprehensive website. In return they or their spouse receives monthly payments for the duration of that person’s life or for a set number of years. The childâs blindness or disability must be verified.Â. Gifting money and assets to your family members throughout your life helps you spend down your financial holdings in preparation for the Medicaid look-back period. Prior to the DRA, the look-back period was only three years. Therefore, they cannot be used as a strategy to avoid violating the look-back rule. And there is no shortage of annuity salespersons. This not only helps applicants “spend down” excess assets without violating Medicaid’s look-back period, it also provides peace of mind knowing that these expenses are already covered. For example if a Medicaid applicant shows that, for the past 15 years, they donated $1,000 per year to the same charity or religious institution.