TRANSFERS AND MEDICAID ELIGIBILITY
Making Transfers for Less than Fair Market Value
Because Medicaid limits the amount of assets an individual may have before they qualify for Medicaid benefits, individuals oftentimes desire to transfer away assets to their loved ones to try and qualify for Medicaid benefits without having to spend all of their assets first on nursing home care. For purposes of Medicaid eligibility, Medicaid distinguishes between assets transferred by gift and assets transferred for full fair market value. A person may transfer assets for full fair market value at any time without any penalty. However, a transfer for less than fair market value will result in the Medicaid applicant being ineligible for Medicaid for a period of time, known as the “disqualification period”.
Under the Deficit Reduction Act of 2005, which went into effect on February 8, 2006, Medicaid is required to determine whether a Medicaid applicant has made any transfers for less than fair market value at any time during the previous 60 months prior to the time of application. This 60 month time frame is known as the “look back period”. It is critical to understand that the disqualification period and the look back period are two separate things. A disqualification period results from making a transfer for less than fair market value at any time during the look back period.
Determining the Disqualification Period
The disqualification period is calculated by dividing the State of Nevada’s estimation of the average monthly cost of nursing home care by the amount of the gift made by the Medicaid applicant. Presently, the State’s estimation of the average cost of nursing home care is $5,865, but this number does generally fluctuate on an annual basis. In other words, a Medicaid applicant becomes ineligible for Medicaid benefits in Nevada for one month for every $5,865 that the Medicaid applicant transfers for less than fair market value. For example, if an individual transfers $29,325 away by gift, a 5 month disqualification period will be imposed ($29,325/$5,865 = 5).
Many clients assume that the disqualification period begins to run at the time that the gift is made. Prior to the Deficit Reduction Act of 2005, this was true. However, since the passing of the Deficit Reduction Act, the disqualification period begins to run as of the date of application for Medicaid benefits. For example, if an individual transfers $58,650 as a gift on July 1, 2009 and applies for Medicaid benefits on December 1, 2010, a 10 month disqualification period will begin to run starting on December 1, 2010 ($58,650/$5,865 = 10).
Although most transfers for less than fair market value are subject to a disqualification period, certain transfers are exempt from this penalty. These transfers include giving assets to:
– Your spouse
– Your child who is blind or permanently disabled
– Into a trust for the sole benefit of anyone under age 65 who is permanently disabled
– Your child who is under the age of 21
– Your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay in the home during that time
– A sibling who already has an equity interest in the house and who lived there for at least a year before you moved into a nursing home
Because of these stringent rules, transfers should be planned carefully with a full understanding of the consequences of making such transfers. If you are considering making a transfer for less than fair market value and believe you will need to receive Medicaid benefits in the future, it is important that you consult with an elder law attorney first.
If you have any questions regarding this article please call to schedule a consultation. We have two convenient locations:
Gerrard Cox Larsen
2450 St. Rose Parkway, Ste 200
Henderson, Nevada 89074
9139 W. Russell Road
Las Vegas, Nevada 89148
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