Our Norton Shores elder law attorney at Douglas McPhail PLC wants you to have all the facts before applying for Medicaid.
We recommend scheduling an appointment with our attorney to avoid making expensive mistakes that affect your ability to 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.
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 2023, the average cost of nursing home care in Michigan $9,939 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 ($9,939) to determine your ineligibility penalty. If such a gift were made, Medicaid would delay your benefits for 15.09 months. During this penalty period, you would have to use your own income and assets to pay for nursing home care.
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 $12.92 million (2023) during your lifetime, you will be responsible for paying the gift tax. Married couples will be able to gift up to approximately $25.84 million (2023) 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.
Penalty period begins the month you would need Medicaid.
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.
Our Norton Shores elder law attorney at Douglas McPhail PLC can help you start Medicaid planning to avoid transfer penalties and delayed benefits. To schedule your consultation with Medicaid attorney Douglas H. McPhail, call (231) 799-4994.