In addition to providing low-income families and seniors over the age of 65 with health care coverage, Medicaid also pays for long-term nursing home care for elders. If your parent is reaching the age where you think a nursing home might become a possibility, it's important to begin planning years in advance. Both federal and individual state laws govern Medicaid, and both include a period of ineligibility for long-term care coverage if your parent transfers assets before applying.
The Look-Back Period Restricts Transfers
Medicaid eligibility depends on the value of the assets your parent owns. If the value exceeds certain limits, he won't qualify. The easy answer is for your parent to give away those assets, but the law restricts this. The federal government and individual states fund Medicaid, and if all seniors simply gave away their assets to qualify when they need long-term care, it would place a financial burden on the government. Therefore, the law restricts transfers made during the five years before your parent applies, even if he makes the transfers to you. This is commonly referred to as the "look-back" period.
Transfers Are Based on Fair Market Value
The law doesn't prohibit all transfers. It addresses only those made for less than "fair consideration," or fair market value. For example, if your parent owns artwork appraised at $30,000, he can't give it away or sell it for anything less than that during the look-back period. If he sold the artwork for $20,000, he would still have a $20,000 cash asset in the bank, and the $10,000 difference would also count against him for Medicaid eligibility.
Transfers Can Result in a Penalty Period
Transferring assets for less than fair market value during the look-back period doesn't bar your parent from Medicaid eligibility forever, but it will result in a penalty period. Calculating the length of this period depends on your state. Begin with the overall value of the assets your parent transferred or undersold, then divide that number by the average monthly cost of a nursing home in your state.
For example, if your parent gave away $30,000 in assets, and if the average cost of a nursing home in your state is $5,000, your father would be ineligible for Medicaid for six months, or $30,000 divided by $5,000. The penalty period usually begins on the day your parent applies for Medicaid, assuming he meets all other qualifications.
Some Assets Are Exempt
Not everything your parent owns counts as an asset for Medicaid purposes. His home is exempt, unless he has a significant amount of equity in it. Even then, the equity may not count if his spouse, his child under 21 years old, or his disabled or blind child are living in the home. At least one automobile is also exempt, as well as life insurance policies and assets that produce income.
An Elder Law Attorney Can Help
The law surrounding Medicaid is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an elder law attorney.
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