When meeting with a prospective client or family who wants to learn more about applying for Medicaid to pay for nursing home care, one of the primary concerns is whether the prospective client has made any transfers within the last five years.  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. When applying for nursing home Medicaid, the government looks back five years for any asset transfers, and imposes 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 penalty period can seem very unfair to someone who made gifts without thinking about the potential need for Medicaid. For example, what if you made a gift to your daughter to help her through a difficult 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.

To avoid a penalty period, you will need to prove that you made the transfer for a reason other than qualifying for Medicaid. The burden of proof is on the Medicaid applicant and it can be difficult to prove.

The following evidence may be used to prove the transfer was not for Medicaid planning purposes:

  • The Medicaid applicant was in good health at the time of the transfer and therefore, did not anticipate needing long-term care at the time of the gift; or
  • The applicant has a pattern of giving. For example, the applicant has a history of helping his or her children when they are in need or giving annual gifts to family or charity; or
  • The transfer was made for estate planning purposes or on the advice of an accountant.

As you can see, proving that a transfer was made for a purpose other than to qualify for Medicaid is difficult. If you innocently made transfers in the past and are now applying for nursing home Medicaid, you should consult with an elder law attorney.  Our firm would be happy to assist you or someone you know.