Many people who realize that their parents may need of long term nursing home care will consider whether their parents will qualify for Medicaid assistance. Medicaid benefits are available for people with minimal assets: only applicants with less than approximately $2,000 total assets qualify for Medicaid nursing home assistance. Clients frequently ask me if their parents can transfer their assets to their children in order to bring the parents below the Medicaid asset ceiling. Asset transfers are usually a poor last-minute strategy to achieve Medicaid eligibility.
Asset transfers intended to achieve Medicaid eligibility will result in a benefit penalty. Any transfer within five years of a Medicaid application is presumed to have been made with the intent to achieve eligibility. Transfers within the five year look-back period will make the applicant ineligible for benefits for a period of time during which he would otherwise qualify based on his need, income, and other assets. The transfer penalty is analogous to the fraudulent transfer remedy in civil law, but the Medicaid penalty has several notable differences.
Fraudulent transfers carry a four year look-back period after which a transfer may not be challenged (there are exceptions); this is one year less than the five year vulnerability under Medicaid law. Fraudulent transfers are subject to reversal; Medicaid transfers will not be reversed. There is no penalty or damages for a fraudulent conveyance other than reversal; transfers intended to achieve Medicaid benefits result in monetary penalties.
Confusing fraudulent transfers and Medicaid eligibility transfers may lead the Medicaid applicant to unproductive or self-defeating Medicaid planning.