Since an individual must meet stringent limits to be eligible for Medicaid, some seniors headed for a nursing home in the future try to give way their assets so as to be eligible for Medicaid. However, Medicaid is not happy with individuals who give away assets that could have been utilized to pay for their own care.
Here is how this works: People anticipate that they may require help for paying for long-term care, and they don’t want to lose their assets because they want to be eligible for Medicaid benefits. So, they give away some of their assets to an individual, who is usually a family member, to lessen the value of their estate. Maybe they heard of some people doing it and ending up on Medicaid, and they decide to adopt the tactic, thinking it would work for them. However, it doesn’t always work that way.
Medicaid; a payer for last resort
Medicaid is a “payer of last resort”, this means that it requires all other means of payment to be used up before paying for long-term care expenses. With little exceptions, if you gift your assets to an individual, you will be deemed ineligible to obtain Medicaid benefits for long-term care for a certain time after applying for Medicaid. In many states like California and New York, this timeframe of ineligibility doesn’t apply to Medicaid-paid home care, but only to nursing and assisted living facilities.
How to Save assets before applying for Medicaid
There are many ways in which you can save your assets before applying for a Medicaid. One of the few methods is by gifting a portion of your assets to individuals. Another way is by putting some of your assets in a trust. However, to ensure that you still remain eligible for Medicaid, you will have to ensure that you take this step five years before applying for a Medicaid. Contact a Medicaid attorney for more insights on this.
Can making a gift before applying for Medicaid save assets?
Gifts attracts penalties which will lead to the individual not being eligible for Medicaid care benefits. To prevent this, gifts would have to be done five years before entering a nursing home to prevent sanctions or penalties.
Gifts that were made before one is being admitted into a nursing home can be penalized and they are subject to a five-year look back penalty period. A gift that a person made within five years before applying for Medicaid will attract a penalty period where the amount that was gifted will determine the appropriate penalty.
For example, the gift will be sanctioned if the nursing home cost $15,000 per month and the individual had made a gift of $15,000 in the previous months. If the gift was worth just $15,000, then there will be a one-month penalty where the individual doesn’t qualify for Medicaid so they will have to embrace private pay for a minimum of that one month before they are eligible for Medicaid again.
The federal government will not pay the tab for the nursing home. Thus, the family members have to pay for that month. This would simply apply to any gift that was worth over $1,000.
If the gift was worth less than the benchmark, $15,000, there is a mild penalty of less than a month if the average cost of the nursing home was 415,000, and glaringly the penalty timeframe would be raised if the gift were bigger than that. There exist a two month penalty if the gift was worth $30,000 and so on and so forth.
So, in a nutshell making a gift before applying for Medicaid can save your assets but can also jeopardize your Medicaid eligibility. To prevent that, you have to ensure that your timing is right. Don’t make a gift if you are certain that you’ll apply for Medicaid the following year or three years later. Call our office for more information.