Qualifying for Medicaid

To qualify for Medicaid a nursing home resident cannot have more than $2,000 in countable assets, in addition to their home, and they cannot have recently transferred assets.  However, there are laws in place to allow a spouse living at home to be able to keep more.

Transfer Penalty

Congress imposes a penalty on people who transfer assets without receiving fair-market value in return.  This penalty is a period of time during which the person transferring the assets is ineligible for Medicaid. 

Important to note, the penalty period does not begin until the person making the transfers 1) has moved into a nursing home, 2) spent-down to the asset limit for Medicaid, and 3) applied for Medicaid coverage.

Options for Preserving Assets

Traditionally, if a Medicaid applicant has excess assets, they must spend down those assets to qualify for Medicaid.  However, Medicaid applicants who want to protect some of their hard-earned assets have a few legal options to protect themselves:

1.        Gift and Return:  The nursing resident transfers all their funds to their children or loved-ones and applies for Medicaid, receiving a penalty period.  After the Medicaid application is filed, the children return half the funds, thus “curing” half of the ineligibility period and giving the nursing home resident the funds needed to pay for care until the remaining penalty period runs.
2.       Gift and Annuity:  The nursing home resident gives half of their funds to their children or loved-ones, and uses the remaining assets to buy a Medicaid compliant immediate annuity.  In Arkansas, the purchase of the annuity is not a transfer of assets that would make the purchaser ineligible for Medicaid.  Income from the annuity is then used to help pay for care during the Medicaid penalty period that results from the transfer to the children.  In such cases, the annuity is typically short-term and just long enough to cover the penalty period.

These strategies may not work in every state, and none of them should be attempted without the help of an experienced elder law attorney. 

Bottom line is you don’t have to panic if you haven’t planned ahead for long-term care.  There are still options available to help you preserve what you have worked so hard for.