Medicaid law imposes a penalty period if you transferred assets within five years of applying- but what if the transfers had nothing to do with Medicaid? It is difficult to do- but if you can prove you made the transfers for a purpose other than to qualify for Medicaid- you can avoid a penalty.
You are not supposed to move into a nursing home on Monday- give all your money away on Tuesday- and qualify for Medicaid on Wednesday. So the government looks back five years for any asset transfers- and levies a penalty on people who transferred assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
The penalty period can seem very unfair to someone who made gifts without thinking about the potential for needing Medicaid. For example- what if you made a gift to your daughter to help her through a hard time? If you unexpectedly fall ill and need Medicaid to pay for long-term care- the state will likely impose a penalty period based on the transfer to your daughter.
To avoid a penalty period- you will need to prove that you made the transfer for a reason other than qualifying for Medicaid. The burden of proof- is on the Medicaid applicant and it can be difficult to prove. The applicant must prove with convincing and objective evidence that there was no reason to believe at the time of the transfer that Medicaid payment for Long Term Care Services might be needed. The following evidence can be used to prove the transfer was exclusively for a purpose other than qualifying for Medicaid:
- The Medicaid applicant was in good health at the time of the transfer. It is important to show that the applicant did not anticipate needing long-term care at the time of the gift.
- The applicant has a pattern of giving. For example- the applicant has a history of helping his or her children when they are in need or giving annual gifts to family or charity.
- The applicant had plenty of other assets at the time of the gift to meet the current and expected needs of the individual- including the costs of nursing home or institutional care. An applicant giving away all of his or her money would be evidence that the applicant was anticipating the need for Medicaid.
- The transfer was made for estate planning purposes or on the advice of an accountant.
The fact that the individual had not yet applied for Medicaid – had not been admitted to an institution or was not aware of the assets transfer provisions does not meet the evidence requirement.
According to the Virginia Medicaid Manual- “[a] sudden loss of income or assets- the sudden onset of a disabling condition- or personal injury- may provide convincing evidence.” (Virginia Medicaid Manual Section M 1450.400.)
Proving that a transfer was made for a purpose other than to qualify for Medicaid is very difficult. If you innocently made transfers in the past and are now applying for Medicaid- consult with your elder law attorney.