For those in need of care that hold countable assets available to pay for long-term care, the base Medicaid regulations require to spend down those under the Medicaid asset limit before becoming a successful Medicaid applicant. In order to transfer assets to other family member or other individuals, all of the Medicaid transfer rules must be followed in order to avoid a transfer penalty.
For those in need of care that hold countable assets available to pay for long-term care, the base Medicaid regulations require to spend down those under the Medicaid asset limit before becoming a successful Medicaid applicant and obtaining Medicaid eligibility. In order to transfer assets to other family member or other individuals, all of the Medicaid transfer rules must be followed in order to avoid a transfer penalty.
For starters, it is important to learn the Five Year Look-Back Period. Under this rule any transfer of assets for less than fair market value made within 5 years of a Medicaid application will result in a transfer penalty period of ineligibility before Medicaid assistance will begin. It is incumbent on the family to plan well in advance before institutionalization and nursing home care.
The most common Medicaid planning tool is to establish an irrevocable trust at least 5 years before making any Medicaid application, and transferring assets or perhaps the transfer of a home into the trust (thus avoiding estate recovery). This requires foresight and early estate planning.
But what if a transfer is made and Medicaid assistance is required less than 5 years after a gift is made. If a person has made a gift with a date of transfer within this 5 year period and a Medicaid application is made because all other available countable asset have been spent down. In that event, a transfer of assets penalty will be imposed, as established by the Deficit Reduction Act of 2005 (DRA). The penalty in Missouri, for example, is currently $8,235 per month; the equity interest of the gift made will be divided by this penalty divisor and the result will be the number of months after the application that the applicant will be ineligible for Medicaid.
It should be noted that there are exceptions to these rules that should be investigated. For example, a family may set up a trust for a blind or disabled child and assets transferred are transferred to this trust, no penalty period is imposed.
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