Smaller Print Larger Print
800-336-4529 618-985-4529
The question is: "When, if ever, does Mom become eligible for Medicaid benefits?"  Here are several scenarios.  The answers are on page -------

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

When Is Three Years Not Three Years?

 

            The question is: "When, if ever, does Mom become eligible for Medicaid benefits?"  Here are several scenarios.  The answers are on page -------

 

  • 1. Mom gave $80,000 to her daughter 12 months ago.

 

  • 2. Mom gives all of her money ($60,000) to her daughter today. Mom enters a nursing home tomorrow and applies for Medicaid.

 

  • 3. In January 2001, Mom gave her daughter $120,000. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 4. In May 2001, Mom gave her daughter $120,000. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 5. In December 2000, Mom put her daughter's name on the deed to her $125,000 house. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 6. In January 2001, Mom transferred $120,000 to a revocable living trust. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 7. In January 2000, Mom transferred $120,000 to an irrevocable support trust. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 8. In February, 2003 Mom and Daughter consult with an elder law attorney who specializes in Medicaid issues, and they set up a plan regarding her $120,000 consistent with the Medicaid rules. Mom enters a nursing home March 2003 and applies for Medicaid February 2004.

 

  • 9. In January 2004, Mom and Daughter consult with an elder law attorney who specializes in Medicaid issues. Mom transfers her $125,000 home and $120,000 cash to her daughter consistent with the Medicaid rules. Mom enters a nursing home February 2004 and applies for Medicaid.

 

  • 10. In February 2001, Mom transferred her $125,000 home and $120,000 cash to her daughter, retaining a life estate in the home. In January 2004, an advisor told Mom she should talk with an attorney, and refers Mom to an attorney he knows who does estate planning. The attorney prepared a new will and powers of attorney for Mom. The attorney also advised Mom to transfer all but $2,000 of her remaining $8,500 to her daughter so she could qualify for Medicaid. Mom enters a nursing home in February 2004 and applies for Medicaid.

 

            The answer to all scenarios can be found in Illinois and federal law. The analysis begins as of the earliest day on which Mom is either in a long term care or supportive living facility or has applied for Medicaid benefits. This is the "trigger" date Medicaid looks at Mom's assets.

 

            If Mom is married, then the rules for the prevention of Spousal Impoverishment apply.  If Mom is single,  she will have to spend her assets down to $2,000.

 

            You may recall from prior articles in this series that certain assets are "exempt" (until Mom's death or she is no longer able to live at home (or if she is married, the death of her spouse).  They include the following: residence; vehicle; personal property; $1,500 cash value life insurance; pre-paid funeral plan; burial plot, casket and headstone.

 

            With few exceptions, all other assets count.  The "trigger" date opens a window backwards of 36 months through which Medicaid may identify gifts or transfers.  (The window for transfers to trusts is 60 months.)  Stripping away the technicalities (which can be very, very important in many cases), Medicaid then combines all the gifts and transfers that fall within the window and divides the total by a state-mandated amount.  The amount can be as low as $1,800 or as high as $6,000 or more.  In Mom's case, let's assume the divisor is $3,000 per month. The result is the number of months Mom is ineligible for Medicaid benefits.  The ineligibility (or penalty period) begins on the first day of the month in which the gift or transfer was given.  (Note, the rules for calculating the penalty period are actually more complicated than this. If followed precisely, the rules can be made  to benefit Mom. But the rules frequently are not followed by Medicaid - unless someone who has a detailed knowledge of the ever-changing rules requires Medicaid to follow the letter of the then current law.)

 

 

 

            ANSWERS:

 

1.  Not yet. Mom has not applied.

 

2.  Not for 20 months (i.e. $60,000 divided by $3,000 per month penalty equals 20 months).

 

3.  Immediately. The gift is not within the 3-year look back window.

 

4.  Not until 40 months have passed, because she applied during the 3-year look back period.

 

5.  Per Medicaid rules, there has been no gift. The full value of the home remains.  Thus there is no transfer penalty. However, the home is not protected. It remains subject to a lien and estate recovery.

 

6.  There has been no transfer. The $120,000 must be spent down on Mom's care.  In addition, all payments made from the trust for Mom's care will be treated as both income and as a transfer of assets -- a triple whammy!

 

7.  The 40 month transfer penalty has passed. However, the $120,000 must be spent on Mom's care because the money in the trust can be used for Mom's support. Further, all payments made from the trust for Mom's care will be treated as both income and as a transfer of assets -- another triple whammy!

 

8.  Immediately. Although the gifts were made within the 3-year look back window, the gifting plan was set up elder law attorney so that all gifts were made consistent with the Medicaid rules.

 

9.  Immediately. During the consultation, the elder law attorney uncovered facts which allowed Mom to transfer her home and all assets to her daughter consistent with the Medicaid rules.  Although all transfers were made only one month prior to Mom's entry into the nursing home and an application for Medicaid benefits, she qualifies for Medicaid benefits immediately because all transfers, based on the facts of her case, were allowable by the Medicaid rules.

 

10.  The person in the aging network recognized that Mom had a potential problem, but the estate planner did not.  Medicaid will impose a 40 month transfer penalty for the transfer of the cash, plus an additional penalty period for the transfer of the remainder interest in the home.  The exact additional penalty period will need to be calculated consistent with the Medicaid rules based on Mom's age, but could be up to 41 months - resulting in a total penalty of perhaps 81 months.  Incidently, the estate planner not only gave bad advice which was no bargain, s/he could be subject to other sanctions under federal law.

___________

 

            CAUTION:

 

            The foregoing scenarios are for illustrative purposes only. You should not rely upon the answers given without consulting a knowledgeable elder law attorney.  Very slight differences in the facts of a case can result in truly substantial differences in the outcome. For example, the difference of one day or one dollar can cause the calculations to fall like a long line of dominos.

 

            In fact, the penalty periods which Medicaid will impose in several of the foregoing scenarios can be undone or undone in part -- IF Mom or her daughter get good advice.  Similarly, the spend down, lien, and estate recovery problems illustrated in several of the scenarios can be remedied. In all cases, it is important for Mom or Daughter to consult with an elder law attorney with substantial experience in Medicaid issues as soon as possible.