Medi-Cal Asset Transfer Rules

In order to be eligible for Medi-Cal, 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 (or whomever) on Tuesday, and qualify for Medi-Cal 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 Medi-Cal. The penalty period is determined by dividing the amount transferred by what Medi-Cal determines to be the average private pay cost of a nursing home in your state.

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 ($100,000 / $5,000 = 20).

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 ($400,000 / $5,000 = 80).

A person applying for Medi-Cal must disclose all financial transactions he or she was involved in during a set period of time -- frequently called the "look-back period." The state Medi-Cal agency then determines whether the Medi-Cal applicant transferred any assets for less than fair market value during this period. The look-back period for all transfers is 60 months (except in California, where it is 30 months). Also, keep in mind that because the Medi-Cal program is administered by the states, your state's transfer rules may diverge from the national norm.

The penalty period created by a transfer within the look-back period does not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medi-Cal eligibility, (3) has applied for Medi-Cal coverage, and (4) has been approved for coverage but for the transfer.

For instance, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018, and spends down to Medi-Cal eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts. In states that have so-called "filial responsibility laws," nursing homes may seek reimbursement from the residents' children. These rarely-enforced laws, which are on the books in 29 states, hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs. In 2012, a Pennsylvania appeals court found a son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law.

Exceptions

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include the following:

A spouse (or a transfer to anyone else as long as it is for the spouse's benefit)

A blind or disabled child

A trust for the benefit of a blind or disabled child

A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medi-Cal applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:

The applicant's spouse

A child who is under age 21 or who is blind or disabled

Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medi-Cal applicant, under certain circumstances)

A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home

A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Congress has created a very important escape hatch from the transfer penalty: the penalty will be "cured" if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. However, some states are not permitting partial returns. Check with your elder law attorney.

Contact us

Questions? Contact us at Elise Lampert, Attorney at Law

Elise Lampert, Attorney at Law

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: 818-905-0601

Email:elise@elampertlaw.com

http://www.eliselampert.com