Steps to Take for Transfers that Initially Would Appear to Give Rise to a Medicaid Penalty

Steps to Take for Transfers That Initially Would Appear to Give Rise to a Medicaid Penalty

1. I have seen many situations in which a parent has transferred virtually all of his or her assets to a child. If such parent goes into a nursing home within 60 months, there is a possibility of a substantial period of ineligibility.

2. One ameliorating possibility is that all transfers utilized by the child on behalf of the parent do not give rise to a penalty. The problem with such approach is that if a parent goes into a nursing home and funds are remaining, funds that have not been utilized for the parent are treated as uncompensated transfers.

3. If a transfer is made to a child and a parent goes into a nursing home very soon thereafter, the monies can be returned to the parent either directly or through a power of attorney. That is, any monies returned undo the transfer.

An interesting example would be the gifting of a home by a single parent to a child. If the parent goes into a nursing home more than 60 months after such gift, the gift would not be subject to penalty. Of course, the child’s basis (cost) becomes the basis of the parent.

A more interesting example is the parent giving the home to a child (or possibly two children) and the parent goes into a nursing home four years later. A possible planning technique would be for the child or children to pay for the nursing home for the remainder of the 60-month period.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© March 2009, Post #18