Medicaid eligibility is a confusing and complex area of the law.
If you are making a decision, or planning a course of action, because
you think it will, or will not, "affect your eligibility for Medicaid"
should you require long-term care, you should consult
a professional from your own state, who is familiar with the local
rules and agencies. Also keep in mind that the law is
always changing and that professionals may not be able to "guarantee"
that things will work out as planned. This article is intended only
to make you familiar with some of the basic facts about the ways in
which gifts or "transfers" can affect eligibility IN CONNECTICUT.
This article is included because this subject is as much misunderstood
as it is widely discussed. Be aware that the law on transfers may
be applied differently in different states. You should also be
aware that the law in this area is changing, that what follows is only
an interpretation of the rules, and that state agencies and officials
may not necessarily agree with all of the statements in this
article. MAJOR CHANGES HAVE MADE THE MAKING OF GIFTS MUCH MORE
DANGEROUS FOR BOTH GIVER AND RECIPIENT.
If you are reading
this article because you are wondering if SOMEONE ELSE, who is elderly,
"should make gifts" for Medicaid, please remember that any elder law
attorney worthy of the name will view the elderly person as his or her
client, and not you -- there is no "should" when it comes to
gifts. Even if a gift won't cause a penalty (such as to a
disabled child) that does not mean that it may not still negatively
impact the person making the gift. If you are elderly yourself,
be sure the attorney you see makes it clear that YOU are the client,
not the thoughtful relative who drove you to the appointment.
Finally, this article does not represent an endorsement of any
particular course of action. As a matter of principle, I believe
that the choices you make concerning your resources and your lifestyle
must first take your own feelings, wishes, and comfort level into
account before you can even think about whether a particular course of
action will "save your family money." As with planning for death
tax savings, planning that takes into account the high cost of
long-term care and the requirements of the Medicaid program should not
put money saved, before your quality of life. "Giving it all away" can
impact your life seriously, whether by affecting Medicaid eligibility,
or by precluding the possibility of a reverse mortgage that might keep
you cared for at home longer. You may wish to view my online
slide-show about paying for care to consider some of the
consequences of being on Medicaid. This article does not
weigh the pros and cons of making gifts, but merely sets forth the
Medicaid rules and regulations that will affect you if you do make
As a general rule, citizens have the right to decide what happens to
their money. That is, you have the right to make gifts. The only
exception is that you are not allowed to make gifts intended to defraud
your creditors. This means, if you run up a big credit card bill,
you cannot legally give away your assets deliberately so you can't pay
the debt as it comes due. If you do, the courts can make the
people you gave your money to, give it back, because it was given as a
You may have heard of people "giving away" their money "to qualify for
Medicaid" if they ever enter a nursing home. Since the gift is in
advance of the nursing home cost, it generally should not be treated as
a "fraudulent transfer." However, in order to discourage people
from doing this, the law imposes a "penalty period" of ineligibility
for Medicaid that is proportionate to the amount of the transferred
property if the transfer is made during something called the "look
back" period, whether the transfer is by the person applying for
Medicaid or by the person's spouse. The penalty period and the
look-back period are not the same.
- What is the
"look back" period? That is the period of time
during which the state "looks back" to see whether you (or your spouse)
made a gift. The Deficit Reduction Act of 2005 changed the "look
back" period for gifts on/after 2/8/06 to 5 years. For gifts
prior to that date, 3 years, but 5 years if the gift was made to or
from a trust. Gifts by an institutionalized person already
eligible for Medicaid are also "looked back" at.
Post 2/8/06 gift 5 years + 1 day
before applying for Medicaid
OUTSIDE the "look-back" period;
has no effect on eligibility
Post 2/8/06 gift 4 years + 364
days before applying for Medicaid
INSIDE the "look back" period;
affects eligibility. Now you have to determine the resulting
- What is the
"penalty period"? The "penalty period" is the
period of disqualification from Medicaid benefits for institutional or
long-term home care which is imposed if a "transfer" is made
during the "look back" period. The "penalty period" is not the
same as the look-back period. The length of the penalty period is
calculated by dividing the amount transferred, less any value received,
by a figure known as the "average monthly cost of care" in effect
during the month of application. As of 7/1/09, the "average monthly cost of
care" figure in Connecticut is $9,959.00. Prior to 2/8/06,
the "penalty period" began to run the 1st day of the month you
made the gift. For gifts on/after 2/8/06, the penalty period does
not begin to run until you are receiving care that would
entitle you to Medicaid if you are otherwise qualified and have
applied and would qualify but for the gift. The same
computation applies if the person is receiving care at home or in a
skilled nursing facility.
Gift of 111,830* made after
2/8/06 and within 5 years of applying for Medicaid.
monthly cost of care in CT = 11,183
(1) Made within the "look-back"
period, so the gift affects eligibility.
(2) The gift
results in a "penalty period" of 10 months.
(3) If the gifts was made before 2/8/06, the 10 months is over - no
(4) If the gift was made on/after 2/8/06, the 10 months does not START
until you are "otherwise eligible" based on an "application."
Gift of $1,118,300 made within 5
years of applying for Medicaid (if made on/after 2/8/06) or within 3 years (if made
(1) Made within the "look-back"
period, so the gift affects eligibility.
(2) The gift
results in a "penalty period" of 100 months, or 8.33 years.
person making the gift is NOT ELIGIBLE for Medicaid until 8.33 years
Gift of $1,118,300 made 5 years
+ 1 day before applying for Medicaid (if made on/after 2/8/06)
Outside the "look-back" period,
so the gift does not affect eligibility.
For gifts prior to 2/8/06:
"penalty period" used to start the FIRST DAY of the month in which a
transfer is made, so a gift of $11,183 on January 1, 2006 means that by
February 1, 2006 the gift no longer had any effect on
eligibility. Since more than 3 years has now passed since February 8, 2006, however, we are no longer
concerned about how penalties would have been imposed on gifts prior to
February 8, 2006.
For gifts on/after 2/8/06: if the same person had
made the $11,183 gift on March 1, 2008, then even if (s)he applied for
benefits as late as 3/1/2013, (s)he might still have a one-month
penalty period and might be denied coverage for one month.
- Is a penalty
imposed on every transfer? NO. Certain transfers are
"exempt" or disregarded. These include (but there are others):
- Transfer of home to a child who
for 2 years lived with and provided care to applicant that kept him/her
out of a nursing home.
- Transfer of assets to a child or
other person who for 2 years lived with and provided care to applicant
that kept him/her out of a nursing home, to the tune of the average
nursing home cost times the number of months of care (per Connecticut
- Transfers to or for the sole
benefit of a spouse.
- Transfers to or for the sole
benefit of, or in special trusts ("OBRA '93 Trusts") for disabled
persons under 65.
- Transfers to a disabled child.
- Transfer to sibling who lived in
home for 1+ year and had ownership interest in the home.
- Certain other exceptions apply
-- but you should consult an attorney about proving that ANY of the
- What is
considered a transfer? Some things that you may not
think of as transfers by you, will be treated as transfers and, if made
within a look-back period, will affect your eligibility for Medicaid.
- Any transfer made by your spouse
before you are awarded Medicaid is treated the same as if it were made
by you. (Special rules apply if both of
you require long-term care.)
- Transfers made on behalf of
either of you by a conservator, under power of attorney, etc., are
treated as if made by you.
- Withdrawals by a joint
account-holder from a joint bank account.
- Putting the title to your house
into joint names with someone else.
- Buying certain kinds of
annuities -- the law has become complex in this area, so some purchases
are OK but only an elder law attorney would be able to explain this
- Lending money if the promissory
note does not meet certain criteria or if you forgive the loan in your
- Failure to make the election to
take your "statutory share" of the estate of your spouse -- to "elect
against the will" -- if (s)he dies before you, may be a transfer.
- Distribution from a living trust
established by you or your spouse upon the death of either of you, if
the other person requires long-term care.
- Disclaimer of an inheritance is
- A gift in a will is not
- A gift (of anything except your
home or proceeds of a reverse mortgage or line of credit) by your
spouse at any time after you are awarded Medicaid benefits, is not
a transfer (at least in CT).
- Buying a "life use" if you don't
live in the property for at least a year.
- Selling something below-market
-- like selling your home at a discount.
- Giving away your home and
retaining a life use.
- Is it against
the law to make a transfer? No. Some years back, the
"Granny goes to jail" law suggested this could happen, but it was
replaced by the "Granny's lawyer goes to jail" law that made it a crime
for an individual (for example an attorney) to advise an individual,
for a fee, to make a transfer of assets in order to qualify for
Medicaid if a penalty period is imposed on the transfer. However,
during the Clinton administration, the Justice Department publicly
stated that it regarded the law as unconstitutional and will not
enforce it, and a New York court reached the same conclusion. We
haven't heard of any attempts to revive that law.
- What if the
money runs out during a penalty period? The law prohibits a nursing home
from discharging a person unless there is an appropriate plan of care
for that person. In other words, it is not legal to "dump" a
nursing home patient by the curb whether or not (s)he can pay for the
room and whether or not Medicaid is paying. See http://www.CTElderLaw.org for
more on nursing home residents' rights. Nor does Connecticut have any law requiring a
person's children to foot the bill for a parent's care or to take the
parent back into the child's home. SO FAR! On the other
hand, if you get sent to a hospital, the nursing home may not have to
take you back if you are away more than 15 days, so you might wind up
somewhere else. In addition, by law,
states must have rules to prevent "undue hardship" to an applicant for
Medicaid who is ineligible for benefits because of a transfer.
State regulations say that the Department of Social Services may
require you to show that:
- The nursing home has threatened
to evict you (the person who made the transfer).
- You and your spouse (if not in a
nursing home) do not have assets available to pay the nursing home due
to circumstances beyond your control.
- You sign an "assignment of
rights" so that the State can take legal action to get funds you are
entitled to. This may include: (1) going to court to get a
support order against your spouse; or (2) going to probate court to
argue that someone using your power of attorney took your money.
- Can anything
else bad happen to me or the person to whom I make the gift, because I
made the gift? YES. Under a law enacted June 8, 2005, making a gift within the
"look-back" period creates a debt owed to the State of Connecticut by the transferor and the
transferee, in the amount of Medical Assistance provided, not to exceed
the amount of the gift. Example: Fit, active and healthy
75-year-old Grandma gives granddaughter $20,000 for tuition in July,
2005. In December, 2007, Grandma has a stroke and enters a
nursing home. Her money runs out in June 2008 and she applies for
Medicaid. The penalty period expired years ago and her
application is approved. BUT, the State knows she has made a
$20,000 gift during the prior three years, and in August 2008 sends the
granddaughter (who has since graduated and is trying to pay off her
other student loans) a notice that she owes the State $20,000.
Nice? What else might happen? COMMON SITUATION: If
your relative signed as "responsible party" on the nursing home
admissions contract, the facility might sue him or her for
your nursing home bill if it isn't paid by Medicaid. Believe
it. It does and will happen. COMING SOON: The nursing
home industry is pushing for new laws that will allow them to sue the
relatives directly, even if they did nothing wrong.
- What if I
made a transfer and can't get the money back? What
can I do? Consult an attorney. The stakes are high. The
person who signs the nursing home admissions agreement may get sued. However, many gifts have quite innocent
explanations, were made for reasons that had nothing to do with
Medicaid planning or were made to compensate someone for services
provided, or low rent, or some other quite good reason. If you made a
gift when living independently, within your means, in reasonably good
health, for a darn good reason you can prove, even a major gift may
ultimately get through if worst comes to the worst and you require
long-term care and seek Medicaid assistance. But
it's serious business and worth getting professional help to argue your
case. By the same token, don't let the law
paralyze you. Again -- if you act
prudently, within your means, in light of your anticipated health
needs, and make a gift for a good reason, NOT IN ORDER TO QUALIFY FOR
MEDICAID, you should not be "punished."
- Can I give
money away to my kids and make sure I can still have access to it if I
need it? Do you know the old saying "you
cannot have your cake and eat it too"? There
are many ways a lawyer can help to reduce the risk that your kids will
still have the money you give them if and when you need it, and that
they will still choose to use it for your wants and needs, if and when
you want them to. But there are no
guarantees. There is no free lunch. If you choose to part with your estate early
in order to "beat the look-back," be aware of the risks. It's your
choice -- you can choose to take that risk if you care a lot about
passing on your estate. Your children may
have needs and you may want to help. You may not want your life savings
to get used up on nursing home expenses when you worked so hard to save
something for your family. But there is no
free lunch-- no absolute guarantee that the money will be there when
you want it -- at least not if you want to be sure that the funds won't
still be counted as available to you when you apply for Medicaid.
I discuss some of the options, and the pros and cons, in a different
IS NOT PROVIDED AS LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT
RELATIONSHIP. NO ENDORSEMENT IS INTENDED BY ANY REFERENCES
HEREIN. PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS
BEFORE TAKING ANY ACTION.
Nachmias Davis 129
Church Street, Suite 805
Davis O'Sullivan & Priest LLC
203-776-4400 fax 203-774-1060
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