Medicaid Transfers of Asset – Medicaid Rules and Regulations

Because Medicaid is designed to provide coverage for people with low incomes, there are medicaid rules in place to make sure people do not just give away their assets to become eligible. If these rules did not exist, even a millionaire could transfer all of his or her assets to a relative today and become eligible for Medicaid tomorrow. That is why Medicaid examines the past thirty-six months. Be aware that transferring assets that are not exempt will create a period of ineligibility. To calculate the length of this period, you must take the amount of the transfer and divide it by the average monthly cost of nursing home care in your area. The result is the number of months you are ineligible from the date of the transfer.

Example: If you transfer a mutual fund worth $20,000 to your son in January and then apply for Medicaid, the $20,000 is divided by the average nursing home cost per month in your area (use $2000 for this example).Dividing the $20,000 by the $2,000 monthly cost for nursing home care results in you being ineligible for Medicaid for ten months. Therefore, you would be ineligible for coverage until November of that year, even though you do not own the mutual fund anymore and may have no way to pay your nursing home bills.

You can see why it is important to use a Medicaid planner to help you understand your Medicaid eligibility.

Medicaid recipients can pay family members for services they perform for them as long as the payment is reasonable. For example, it would be reasonable to pay your daughter $25 a week to do your laundry, but $200 a week would not be reasonable.

You have the right to transfer the assets that are exempt whenever you want without affecting your eligibility. There are, however, medicaid rules restricting when insurance homes and nonexempt assets may be transferred. An unmarried person can transfer his or her home to a minor or disabled child. He or she could also transfer the home to a child if the purpose of the transfer was other than to qualify for Medicaid. The home can also be transferred to a child who lived in it the previous two years to care for the parent, or if the child has an ownership interest in the home and lived there one year prior.

A married person can transfer the home to his or her spouse (who can then transfer it to the children without affecting eligibility). A married person can also transfer any nonexempt asset to his or her spouse, but the spouse receiving it cannot transfer it within thirty-six months for less than its full value.

Transfers can be planned to maximize eligibility yet minimize the amount a person must spend in order to become eligible.

Some options include:
- investing money in the home (such as paying off the mortgage or improving it);
- taking a life estate in the home and giving a remainder interest to your child (which means you have control over it as long as you live, but your child automatically owns it when you die);
- transferring assets between spouses while there are still two spouses alive; and,
- placing assets in an irrevocable trust to protect them.

It is important to consult an attorney who specializes in this area to be sure you are making the best choices and following the law.

Some people get divorced to protect assets from Medicaid. The spouse who does not need Medicaid coverage takes all of the nonexempt assets, protecting them from Medicaid consideration. They are then not counted as belonging to the spouse using Medicaid Transfer of Assets. Being divorced does not mean you cannot live together, so some couples divorce only in name to protect their assets from Medicaid. This may seem like a drastic solution, but it makes financial risk sense to some people.