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How To Qualify For Medicaid (Transfer Of Income And/Or Assets)

The Medicaid Penalty For Transfers Made After February 8, 2006

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You can transfer assets for less than fair market value, but you will be penalized for a period of time equal to the amount of time in a nursing home that what you gave away would have paid. The penalty starts on the later of:

  • The first day of the first month during or after which assets have been transferred OR
  • The date on which you are eligible for Medicaid and would otherwise be receiving institutional care based on an approved application except for the application of the penalty period. This is interpreted to mean the penalty starts when you are in the nursing home. Using the above example, if you gave $50,000 to your son today, and want to check into a nursing home, look at how much Medicaid says it costs to stay in a nursing home in your area for one month. Let's say that is $5,000 a month. That means Medicaid will penalize you and not pay for a nursing home for 10 months ($50,000 divided by $5,000 a month = 10 months) from the date you are eligible to apply for Medicaid.
  • States are forbidden to round down penalty periods. The penalty period would include a fractional part of a month calculated in days.
  • If there are multiple transfers, the state may count all transfers as one transfer.

Because of the rules applicable to transfers after February 8, 2006, the old "rule of halves" planning technique is no longer applicable. Under the Rule of Halves, people were advised to give away half of their assets and keep the other half. The half they kept was used to pay for nursing home care during the penalty period. This technique permitted to pass 50% of their assets to loved ones.

Keep in mind that if you give away you assets:

  • You won't have money for emergencies or for a treatment that may not be covered by Medicaid.
  • You don't know if your relationship will stay the same with the person to whom you gave the assets and informally depended upon to help out.
  • There is no assurance that the person to whom you gave money will not lose it gambling or through other endeavors, to creditors, in bankruptcy -- or even in a divorce.

NOTE: If you made a transfer before February 8, 2006, the look back rules are different.

To Learn More

More Information

Medicaid: Long Term Care

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