PENALTIES FOR TRANSFER OF ASSETS INTO A TRUST
Medicaid pays most of the costs of nursing home care for needy persons. Eligibility to receive Medicaid benefits is based on federal and state guidelines governing the applicant's income and available resources. When a person applies for Medicaid to pay for the costs of her nursing home care, the state Medicaid agency "looks back" at any transfers she has made to determine if she has tried to meet the eligibility requirements unlawfully. A transfer of assets, including income, made without adequate consideration results in a penalty.
- A transfer made from the applicant's revocable trust
- A transfer made to the individual's irrevocable trust if, pursuant to the terms of that trust, no portion of the transferred assets can subsequently be paid to or benefit the applicant
Transfers into other types of trusts are governed by a 36-month "look back" period.
The amount of time that an applicant will be ineligible to receive nursing home benefits is equal to the number of months that the transferred asset could have paid for private-pay nursing home care. Each state has varying methods of determining the actual date of transfer. For example, the state may spring forward to the first day of the month following the transfer to establish the transfer date. For purposes of calculating the penalty period, the average monthly cost for private-pay nursing home care is determined on a state-by-state basis. For example, if an applicant has transferred $50,000 from her revocable trust in January of 2000 and applies for Medicaid nursing home benefits in June of 2000, the agency will look at its private-pay rate for nursing home care. Assuming that the average monthly cost of nursing home care in that state is $5,000 and that the application date is February of 2000, the applicant will be ineligible for benefits for 6 more months. If the applicant applies for benefits in March of 2001, the 10-month period will have no practical effect on her eligibility.
If an applicant has transferred an asset without adequate consideration that is valued at less than the average private-pay rate, the applicant can be ineligible for only a portion of a month. An applicant can obviously have more than one transfer within the "look back" period. Penalties are assessed consecutively, not concurrently.
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