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If you or a loved one is likely to need long-term care within the next few years, you should begin planning as soon as possible. Because of the high cost of long-term care, many individuals rely on Medicaid to pay for this service. As discussed in our previous article, Transferring Assets to Qualify For Medicaid, in order to be eligible to receive Medicaid benefits for long-term care, you must be able to show that you have already "spent down" the majority of your own assets.
We also discussed the 5-year look back period. Generally, if you transfer your assets for less than fair market value within five years prior to applying to Medicaid, your eligibility will be delayed by a penalty period. The length of the penalty period will depend on the number of assets you transferred during the five years prior to applying for Medicaid.
In previous articles, we discussed how to use Irrevocable Trusts and Life Estate Deeds 5 years prior to applying for Medicaid to remove certain assets from your estate for the purposes of Medicaid while retaining some benefit from the asset for the remainder of your lifetime and how to plan for Medicaid when you have a healthy spouse. In this article, we will discuss transfers of your assets that are allowable even if you are within the five year look back window.
You are allowed to make certain types of gifts or transfers for less than market value, which will allow you to reduce your assets for Medicaid purposes. These types of transfers allow you to become eligible for Medicaid benefits by gifting your assets to your loved ones without imposing a penalty waiting period.
You may transfer any type of asset to:
- A spouse who is not seeking Medicaid benefits;
- A child who is permanently disabled or blind, or a trust for that child's benefit; or
- A trust for the exclusive benefit of anyone who is permanently disabled or under the age of 65.
You may transfer your home to any of the following individuals:
- A child who is under the age of 21;
- A "caretaker child" who has lived in the home and provided care for you for at least two years before your moving to a nursing home; or
- A sibling who has an ownership interest in the house and who has lived with you for one year prior to your moving to a nursing home.
Unfortunately, unless the transfer falls into one of these categories, a gift to a loved one or charity will likely delay your Medicaid eligibility if it is not made at least five years prior to applying for Medicaid.
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