We do a fair amount of asset protection for families with loved ones entering nursing homes and deal with medicaid transfers. We almost always transfer assets out of the medically needy individual’s name. This generally allows for the preservation of a majority of the assets and allows the medically needy person to qualify for Medicaid. Most of the time these transfers happen after the sick loved one has entered a nursing home.
The Five Year Look Back Rule imposes a disqualification calculated in months, on receiving Medicaid benefits against the person who owned the assets prior to the medicaid transfer. The penalty is based upon dividing the assets transferred by a specified dollar amount that each state publishes once a year. That specified dollar amount is known as the Penalty Divisor. The Penalty Divisor in Arkansas at the time of this article (2018) is $5,493. That means for every $5,493 transferred out of the Medicaid Applicant’s name in the 60 months prior to submitting a Medicaid Application, there is one month of disqualification from receiving Medicaid benefits once you’ve qualified for them.
As with most rules there are exceptions and that is what this article is about. So, what are the exceptions? Here they are.
Assuming the Medicaid applicant (“the Institutionalized Spouse”) is married, the rules allow for the other spouse (“the Community Spouse”) to keep a minimum amount of the jointly owned assets. The minimum amount the Community Spouse may retain is $24,720. So, if the couple only has $24,700 or less, all of it can be transferred into the Community Spouse’s name and the Institutionalized Spouse will be qualified for Medicaid.
The Community Spouse may retain a maximum of $123,600 of the couples combined assets. This only applies if the combined assets are no more than $247,200. If the combined assets are more than $24,720 but less than $247,200, the Community Spouse may retain half of whatever that amount may be.
Transferring resources for less than fair market value does not apply to trusts if that trust is established for:
The Medicaid applicant’s home can be transferred to certain individuals as a gift within the look-back period without penalty, the list below outlines the medicaid exceptions:
If individuals can prove that they gave away resources for purposes other than qualifying for Medicaid benefits, then they may be able to avoid a Medicaid transfer penalty period of ineligibility.
Medicaid transfers can be overlook under this exception. This is perhaps the most difficult exception to prove. Undue hardship means that the individual would be deprived of food and shelter if they were denied SSI payments.
Paying off debts during the Medicaid Look-back Period is also exempt from violation. For instance, paying off one’s mortgage or home equity line of credit is a great way to turn liquid assets into exempt assets. Medicaid transfer to get out of debt are a great way to help you spouse.
We don’t expect you to know about these rules. We know about them and we can help your family navigate through these difficult rules if you are facing institutionalization for a loved one. Applying for Medicaid can be a scary process and one that can easily be mishandled accidentally. The consequence for denial of a Medicaid application or for failing to properly transfer the applicant’s property can mean the difference of tens of thousands of dollars. At wh Law | We Help, we have literally decades of experience of dealing with DHS and the Medicaid process. You don’t have to do this alone; give us a call today, and we can get started protecting the assets of your loved one who needs full-time assistance in their day to day living.