Transferring Assets to Qualify for Medicaid

Are you concerned about losing your home and life savings to the nursing home? Contrary to popular belief, qualifying for Medicaid does not mean that you and your spouse are required to spend-down the majority of your assets. There are numerous strategies Elder Law attorneys use to protect assets from Medicaid spend-down. You should never attempt to protect your assets from spend-down or any other strategy without the help of a competent attorney who is willing to walk you through the planning and application process. The penalties for donating assets during the look-back period could result in disqualification lasting years. You should also never attempt to hide assets to qualify for Medicaid. Let Metairie elder law attorney, John Sirois, help you protect your assets from long-term care expenses.

Some applicants attempt to meet the resource limitations by removing assets from their estate through asset transfers (donations) to children or grandchildren. At one time, this was a straightforward strategy; however, the look-back rules currently impose more stringent penalty periods for certain transfers.

The Deficit Reduction Act of 2005 (DRA 2005) which became effective on February 8, 2006, significantly changed the Medicaid rules for asset transfer penalties and look-back periods for long-term care benefits. For transfers occurring on or after February 8, 2006, the look-back period for all transfers is 60 months prior to the baseline date.

Louisiana Medicaid Asset Transfer Penalty

If you make a transfer during the look-back period, you will be ineligible for Medicaid benefits for a period of time. The ineligibility period is calculated by dividing the transfer’s fair market value by the private pay rate. The private pay rate is the average cost for a private pay nursing home resident in Louisiana ($5,000 in 2019). The length of the penalty period is without limitation. Therefore, if you make a very large transfer during the look-back period, it is possible to cause a period of ineligibility for the remainder of your lifetime.

If Boudreaux made a transfer of $200,000 in January 2018 to his children and then applied for Medicaid and was institutionalized in June of 2019, the transfer took place during the look-back period. To calculate the ineligibility period, divide the transfer amount by $5,000 (which is the applicable private pay rate). Boudreaux was ineligible for Medicaid benefits for 40 months from the date he is otherwise eligible for Medicaid, but for the transfer). If Boudreaux retains assets to pay for nursing home care during the period of ineligibility, the penalty period will not begin to run until his countable resources are below $2,000. To avoid the ineligibility period due to asset transfers, Boudreaux must wait 60 months until the look-back period expires to apply for Medicaid.

Donating assets has its own inherent drawbacks. You should always consider the tax and non-tax implications of donating assets. If you donate assets, the donee will inherit your cost basis with no step-up available upon your death. Significant income taxes may be due upon the asset’s subsequent sale by the donee. In addition, you lose control of the asset, and the asset will be subject to the donee’s creditors. There are more sophisticated strategies to achieve a step-up in basis and protection from creditors. We can advise you and help you to implement these techniques. When you meet with John Sirois, he will sit down with you and explain your options for transferring your assets so you or a loved one can qualify for Medicaid, and to help ensure the assets are passed down to your beneficiaries.

Contact John E. Sirois, Metairie Medicaid Lawyer, at 985-580-2520 to learn how you can legally protect your assets from nursing home spend-down or to set up an initial appointment.

Click here to download John’s Long-Term Care and Medicaid Planning Checklist.

Read John’s book, Louisiana Retirement and Estate Planning, for more information about long-term care and Louisiana Medicaid planning.