How To Prove Medicaid Should Not Penalize An Asset Transfer
Medicaid law imposes a penalty period if you transferred assets within five years of applying, but what if the transfers had nothing to do with Medicaid? It is difficult to do, but if you can prove you made the transfers for a purpose other than to qualify for Medicaid, you can avoid a penalty.
You are not supposed to move into a nursing home on Monday, give all your money away on Tuesday, and qualify for Medicaid on Wednesday. So the government looks back five years for any asset transfers, and levies a penalty on people who transferred assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
The medicaid penalty period can seem very unfair to someone who made gifts without thinking about the potential for needing Medicaid. For example, what if you made a gift to your daughter to help her through a hard time? If you unexpectedly fall ill and need Medicaid to pay for long-term care, the state will likely impose a penalty period based on the transfer to your daughter.
How Your Assets Impact Eligibility
Besides income, your assets will be counted toward meeting eligibility requirements. Countable assets include checking and savings account balances, CDs, stocks, and bonds.
In most states, you can retain up to $2,000 as an individual and $3,000 for a married couple outside of your countable assets. However, these amounts may vary depending on the state in which you live.
Your home, your car, personal belongings, or your savings for funeral expenses remain outside of countable assets. If you can prove other assets are not accessible , they too are exempt. A house must be a principal residence and does not count as long as the nursing home resident or their spouse lives there or intends to return there.
Upon becoming eligible for Medicaid, all of the applicant’s income must be used to pay for the nursing home where the applicant resides. However, you may be allowed to keep a monthly “allowance” and a deduction for medical needs, such as private health insurance. The amount of the allowance varies depending on your living arrangements, type of nursing facility, and state rules. If you are married, an allowance may be made for the spouse still living in the home.
Professional Medicaid Planning Assistance
The Medicaid look-back period is a very serious and complicated matter. The best way to avoid violating this period and receiving a penalty of Medicaid ineligibility is to consult a Medicaid planner before gifting or transferring any assets. A Medicaid planner can also offer assistance if you have violated the look-back period. One can learn more or be connected with a Medicaid planner here.
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What Is The Look
When senior citizens or disabled persons apply for long-term care Medicaid, regardless of whether it is in-home care services, a nursing home, or assisted living, there is a specific preset limit for assets or property one can have and qualify for Medicaid. Medicaid has a limit set for the amount of assets or property a person can have on hand to receive Medicaid. The look-back period is in place to prevent an applicant from gifting or selling all their assets or property underfair market value to meet the asset limit for Medicaid assistance.
The look-back period begins on the date the Medicaid application is made and looks back 60 months. During the 60-month time frame, all transactions are subject to review before the applicants approval for Medicaid benefits. Before 2006, the look-back period was three years however,Congress changed the ruling to five years as part of theDeficit Reduction Act .
Kansas Medicaid Planning Lawyers Guide Individuals And Families Through The Complicated Medicaid Planning Process To Protect Them From Medicaids Look
Families should begin planning for Medicaid well before they expect to need it. The compassionate KansasMedicaid planning attorneys at Stockton & Stern, LLC. have the experience necessary to help you navigate the complex Medicaid planning process. Our lawyers are knowledgeable in all Medicaid and estate planning laws and help you avoid issues related to the Medicaid look-back period. To schedule an appointment, call us at 913-856-2828 orcontact us online today. Our convenient office locations include Gardner and Overland Park, and we are available to meet you at your home if needed.
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Will You Have To Turn Over All Of Your Assets To The Nursing Home
Clients sometimes have the impression that they will have to turn their financial accounts and the deed to their house over to the nursing home upon admission. This is not the case. Medicaid will not pay for your care unless you are at a qualifying level of assets. Until that point, you are required to use your assets to pay the monthly bill for your care. But you will not turn over control of your accounts to the nursing home.
Can You Get Penalized By Medicaid For Normal Expenses
People are often surprised to learn that Medicaid imposes a penalty period for assets transferred in the five years immediately preceding the date of the Medicaid application.
A penalty period is defined as a period of time that a person will be ineligible for Medicaid benefits. The penalty period is calculated by taking the value of the transferred assets and dividing that number by the average cost of care per day, which New Jersey has estimated to be $357.67 . For example, a person who gifted $50,000 to his or her children during the last five years would receive a penalty period of approximately 140 days . The penalty period begins on the date you apply and are otherwise eligible for Medicaid benefits both financially and medically. During that time, full Medicaid benefits will not be provided. Some people may qualify for ancillary services during the penalty period, but the large out of pocket costs, such as room and board at a facility, will not be covered.
There are certain types of transfers of assets that are permitted by Medicaid, such as gifts or transfers made to your spouse or a dependent child however, there are specific rules and regulations that need to be followed or these types of transfers could still affect a persons eligibility or create a penalty period if not done correctly.
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When Does The Penalty Start
Under the Deficit Reduction Act, the penalty would not start until five conditions have been met.
According to Genworths 2019 Cost of Care Survey the average semi-private rate in Texas runs a family $4,857 per month . . Costs for a private room are understandably more. The survey estimates the median annual cost of a private nursing home room at $77,015 a year. Metropolitan areas like Houston, Dallas, San Antonio and Austin are usually on the higher end of the scale running. Semi-private rooms are about $5,267 monthly. Private accommodations about $7015 per month.
What Is The Medicaid Look
First, it is essential to understand why the Medicaid look-back rule is in place. Medicaid is an assistance program providing benefits based on means test. A means test looks at the monetary resources a person has available to pay for specific goods or services. The program then determines if the individual qualifies based on their income and assets.
Generally, when a senior enters a nursing home, their life expectancy is usually limited, limiting them to spend their assets on anything besides nursing facility care. This reduces the seniors incentive to retain their assets for future use. In contrast, because nursing home care is expensive and the probability of having anything left to pass down to loved ones is reduced, the incentive totransfer assets to their family beforehand is more prevalent.
Without the look-back rule, limiting the amount of assets an individual can give away, a well-off person could give away all of their assets when it becomes evident nursing care is needed. In this scenario, a millionaire could sign away all of their assets and immediately become eligible for Medicaid. The look-back rule has established guidelines penalizing individuals for gifting and transferring their property to become eligible for Medicaid.
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Financial Eligibility Requirements For Long
Many seniors with limited resources find that their countable assets and/or income exceed their states Medicaid limits. To meet the financial requirements, they must carefully minimize or spend down excess funds on things like medical expenses, home improvements, a prepaid funeral plan, etc. Gifting cannot be part of an applicants spend-down strategy for Medicaid.
Read:Assets You Can Have and Still Qualify for Medicaid
To prevent seniors from simply giving all their assets away to family and friends and then relying on Medicaid to pay for their long-term care, the Centers for Medicare and Medicaid Services created a system for reviewing all applicants financial histories. The following sections detail the ins and out of the notorious Medicaid look-back period and what happens if a senior transfers assets for less than fair market value .
How To Avoid Medicaid 5 Year Lookback
For an elderly person to be eligible for nursing home care, assisted living, adult foster care, or in-home care from Medicaid, they must have limited income and assets. To prevent candidates from simply giving away their money or resources to qualify for Medicaid, the federal government implemented the look-back period. This is a set period of time prior to the individuals application during which the Medicaid administering agency reviews all the financial transactions that the senior has made. If a transaction is found to be in violation of the look-back periods rules, the applicant will be assessed a penalty. Penalties come in the form of a period of time that the applicant is made ineligible for Medicaid. This means they will not be able to receive care services paid for by Medicaid for a certain number of months or, sometimes, even years.
A Medicaid applicant is penalized if assets were gifted, transferred, or sold for less than the fair market value. Even payments to a caregiver can be found in violation of the look-back period if done informally, meaning no written agreement has been made. Please note, asset transfers by the applicants spouse can also affect the applicant and can result in a Medicaid penalty period for the applicant. The reason for this penalty period is that these assets could have been used to help cover the cost of long-term care, had they not been gifted or transferred.
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How Much Money Can You Give Away And Still Qualify For Medicaid
In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.
This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
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Example: If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months .
Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.
Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months .
For instance, if an individual transfers $100,000 on April 1, 2021, moves to a nursing home on April 1, 2022, and spends down to Medicaid eligibility on April 1, 2023, that is when the 20-month penalty period will begin, and it will not end until December 1, 2024.
What Is A Medicaid Compliant Annuity
In short, an MCA is a Medicaid compliant product that allows you to turn your excess countable assets into an income stream. Although some MCA strategies involve using a penalty period to the applicants advantage, all strategies allow for the preservation of assets and the acceleration of Medicaid eligibility. To find out if an MCA will work for your situation, reach out to our team at Senior Care Counsel.
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Medicare Vs Medicaid Roles In Nursing Home Care
Medicare does cover nursing home careup to a point. If you are sent to a skilled nursing facility for care after a three-day inpatient hospital stay, Medicare will pay the full cost for the first 20 days. For the next 100 days, Medicare covers most of the charges, but patients must pay $185.50 per day unless they have a supplemental insurance policy. For day 101 and beyond, the patient pays all costs.
These rules apply to traditional Medicare. People on Medicare Advantage plans likely have different benefits
Some nursing homes wont accept Medicaid patients outright, but the law forbids them from throwing you out if you become dependent on Medicaid when you are in their care.
Medicaid Penalty Period: What Is It And How Is It Calculated
There is a penalty period during which you will not be eligible for Medicaid benefits. You should understand how this may affect you. Q. What happens if you give some of your assets to your children and then have no funds to pay for your long term care costs? A. When you apply for Medicaid, you are required to complete a financial qualifications form. This form asks you to provide an inventory of your financial assets. It also asks you to list any gifts you have made in the past five years.
The Tax Incentive Reduction Act of 2005 changes how gifts of your assets impact your eligibility to receive Medicaid. The law extends the Medicaid look back period to five years.
Most important, the date for removing the value of the gifts from the Medicaid eligibility calculations starts the day you apply for Medicaid, not the date you made the gift. The look back rule applies to all transfers made on or after February 8, 2006.
If you made gifts within five years before applying for Medicaid, Medicaid will not begin paying for your long term care until the cumulative monthly costs of your care exceed the value of the gifts you made. This period of time when Medicaid is not available is known as the Medicaid Penalty Period.
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