Medicaid Planning: Gifting Penalties
TThe Medicaid program has strict financial requirements. For example, in 2012, an applicant can only have assets or resources in their name totaling $14,250. If an individual make gifts or transfers of their assets in order to reduce qualify for Medicaid, there are old and new rules which govern such transfers. When one gives money or property away, that individual and their spouse will be ineligible for “institutional” or Nursing Home Medicaid for a certain number of months. Exceptions are made for any transfer to a spouse or a disabled child, and for certain transfers of the home to siblings or caretaker children. The transfer of asset rules does not, under current law, apply to the the Community Based Medicaid Program, (leaving the possibility of transferring assets and qualifying for the Community Medicaid programs immediately.) While the penalty period for nonexempt transfers is still calculated the same way, the Deficit Reduction Act of 2005 (DRA) has changed when the penalty period starts to run. The penalty is determined by dividing the total value of all property transferred by the average monthly cost of nursing home care in your area. The State determines this "average" each year for different regions across New York State. For example, if a Long Island resident transferred $118,490 he or she would have been ineligible for Medicaid for 10 months as $11,849 is the average 2011 cost of nursing home care for Long Island. (Average costs in other regions are $10,957 in the New York City; $10,335 in the Northern Metropolitan area; $8,337 in the Western area; $8,540 in the Northeastern New York region; $9,363 in the Rochester area and $8,015 in the Central New York area.)
Depending upon the fair market value of the assets transferred, the penalty period could extend well beyond five years. In that case, the "look-back" period will become relevant. When applying for Medicaid, the County Department of Social Services or the New York City Human Resources Administration will ask for financial records, bank statements, tax returns, etc. for the past 60 months. A thorough analysis of all transactions within the look-back period and the resulting penalty period should be undertaken prior to filing for Medicaid.
Below are a few of the terms and concepts with which you should be familiar when considering the benefits of accessing the Medicaid system to help finance long-term care:
Look-Back Period. The "look-back" period (i.e., the period of time prior to the Medicaid application for which you will have to provide financial information) is 60 months pursuant under the DRA. All transactions within the applicable look-back period will be examined for Nursing Home Medicaid, but not for Community Medicaid.
Penalty Period. There is no cap on the length of a penalty period imposed because of an uncompensated transfer of assets within the applicable look-back period, which is calculated by dividing the value of the transfer by the “regional rate”. As such, an informed Medicaid applicant will wait 60 months from the date when he or she made large post-DRA transfers before filing his or her Medicaid application, at which point the transfers need not be disclosed and therefore will not be taken into consideration for eligibility purposes. Regardless, it may be prudent to retain sufficient resources to pay privately during the penalty period or obtain Long Term Care insurance for this period to avoid using private assets to pay for nursing home care during this 60 month term.
This Memorandum is based on current law and is for informational purposes only. It is important that you discuss all legal options and consequences with a qualified elder law attorney prior to any action. Should you wish to discuss your situation with us, please call (631) 424-2800 for a consultation. For additional Memoranda, please call or visit our website at www.elderlaw.pro.
