Asset Transfer Rules


At Douglas H. McPhail, PLC, we want you to understand all legal options available to you before applying for Medicaid.

We recommend scheduling an appointment with our team to avoid making expensive mistakes that could negatively affect your ability to protect your assets and pay nursing home costs.

Below you’ll find a list of rules that pertain to transferring assets before applying for Medicaid.

Rules For Asset Transfer

There’s A Penalty If You Transfer Assets Within 5 Years Of Applying For Medicaid

Under state and federal law, transferring certain assets within 5 years of applying for Medicaid will trigger a penalty period and significantly delay benefits. However, just because there's a penalty that doesn't mean your plan can't include gifts or transfers. Many of our asset spend down plans include gifts or transfers made immediately before applying for help. Our expertise allows you to protect as many of your assets as possible and qualify for help at the soonest possible date. 

Your Transfer Penalty Is Based On The Average Cost Of Nursing Home Care

To determine your transfer penalty, divide the total value of all gifts made within 5 years of applying for Medicaid by the average cost of nursing home care. For 2024, the average cost of nursing home care in Michigan $10,870 per month.

For example, if you made gifts totaling $150,000 within 5 years of applying for Medicaid, you would need to divide that amount by the average monthly cost of nursing home care in Michigan ($10,870) to determine your ineligibility penalty. If such a gift were made, Medicaid would delay your benefits for 13.79 months. During this penalty period, you would have to use your own income and assets to pay for nursing home care. We have proven formulas for making this work to your advantage.

Rules For Gift Tax Don’t Apply To Medicaid Planning

Gifts are defined as either cash or assets you give away. Once you have gifted over approximately $13.61 million (2024) during your lifetime, you will be responsible for paying the gift tax. Married couples will be able to gift up to approximately $27.22 million (2024) during the course of their lifetimes. While most people will never have to worry about owing a gift tax, you’ll want to consult with our estate planning attorney if you have a large estate.

It’s important to understand that rules for gift tax are different from those governing Medicaid eligibility. The gift exclusion amount is exempt from income, estate, and gift tax reporting rules. However, you must always report gifts made within 5 years of the day you applied for Medicaid.

Rules For Gift Tax Don’t Apply To Medicaid Planning

It used to be that penalty periods began the month you transferred assets. Today, the penalty period begins the day you’re admitted to a nursing home and have applied for Medicaid. Even if you meet other requirements for Medicaid, you won’t be able to receive assistance due to the transferred assets.

Multiple Gifts Are Treated As One Transfer

In the past, each gift made during the 5-year look back period was viewed and computed separately. Today, the government sees gifts as being cumulative. This means that the value of all the gifts you made 5 years prior to your Medicaid application date are added together and treated as one transfer.

About Our Firm

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Douglas H. McPhail, PLC
800 E. Ellis Road
Norton Shores, MI 49441
(231) 799-4994