Busting the Biggest Medicaid Myth: Transfer of Assets
As a lawyer, my clients often share rumors that they hear circulating “on the streets” about all kinds of legal issues. I credit them for bringing those rumors to me, because it gives me a chance to clear them up and it gives them a chance to get the right advice and do the right thing. Because my practice involves elder law, the most frequent rumors I hear involve Medicaid. They are also the most frustrating. I am amazed at the misinformation that circulates so recklessly.
The biggest Medicaid buzz my clients have shared with me has to do with what to do if a parent suddenly becomes seriously ill, has no long-term care insurance, hasn’t done Medicaid advance planning, and needs Medicaid to pay for a home. permanent elderly. watch out. More than one client has told me that friends and acquaintances have advised them to put all of their parents’ assets in their name because then Medicaid will see that they have nothing and they can qualify for Medicaid right away.
WRONG!
Not only is it wrong, but it is riddled with problems that could subject those in need and their families to sanctions, disqualification, or worse, criminal charges.
Whether an ill senior will immediately qualify for Medicaid to pay for nursing home care depends on whether they did advance Medicaid planning or whether their current financial status qualifies them to begin with. The truly destitute should have no problem qualifying. It is the lower middle class, those with modest assets who are trying not to lose out entirely, especially if they have a healthy spouse or children, who face a more challenging task to qualify.
Congress has created methods by which those who are not destitute but not wealthy can try to protect some or all of their assets in order to qualify. In the best case scenario, someone who plans ahead can create a Medicaid-qualified trust, transfer all of their assets into the trust, and wait for the five-year “look-back” period to elapse. When the person can show that they have not had any assets for at least five years (because the trustee of the trust owns their property and the Medicaid applicant cannot be the trustee), they should qualify for Medicaid.
It’s in the worst case scenario, when a senior can’t plan at all, or what we in the industry call “the Medicaid crisis case,” that problems arise. And this is where those rumors abound. Because Medicaid looks back five years into an individual’s financial history to determine what they own and where they went, any transfer of their assets to someone else’s name without adequate compensation for the transfer will earn the Medicaid applicant a penalty period, which means they won’t qualify for coverage for a certain period of time, based on a set formula.
Tea the worst What a child might do is transfer their parent’s assets out of the parent’s name thinking Medicaid won’t know, or not report all assets thinking Medicaid won’t find them, which amounts to defrauding Medicaid and could subject that person to criminal action. burdens (Different rules apply to spouses). The fact is that Medicaid does a thorough review of each applicant’s financial background, references and document cross checks, verification of all financial transactions, bank accounts and other assets, and will determine if the money has been transferred. . By the time they find out, it will be too late for the senior to do anything to reverse those transfers and they will be disqualified from receiving Medicaid benefits for at least a period of time.
Congress has authorized several methods by which even “crisis” cases can protect some of your assets. Some examples include purchasing an irrevocable funeral trust, investing in certain home improvements, giving gifts with promissory note repayments, and entering into personal service contracts with family members. The only way to know if you or your loved one can protect some or all of your assets is to consult an elder attorney who specializes in Medicaid planning.
As my father used to say: “Believe half of what you see and none of what you hear.” This is good policy when it comes to Medicaid rumors. Get the right advice so you can get the best for your loved ones.