The transfer of assets without consideration is a Medicaid Secret. It is usually penalized as a disallowed transfer of assets under Medicaid. The goal of Medicaid planning is how to protect assets by a transfer of assets. Getting too close to the Medicaid program and the onerous bureaucracy who runs the program is like getting to close to a buffalo without something between. It is very dangerous!
The OAC at 317:35-19-20(6) REFERENCE LOCATION Transfer of assets on or after February 8, 2006, provides: “An institutionalized individual, an institutionalized individual’s spouse, the guardian or legal representative of the individual or individual’s spouse who disposes of assets on or after February 8, 2006 for less than fair market value on or after the look-back date specified in (A) of this paragraph subjects the individual to a penalty period for the disposal of such assets.” This means that Medicaid considers the actual value of the property transferred to determine if it was transferred for less than fair market value. If a parent deeds a home or other parcel of land, or a mineral interest to a son or daughter for $1 it will be penalized as a disallowed transfer of assets.
How to protect assets and avoid a transfer penalty is a Medicaid Secret worth knowing. First there is the issue of what is the fair market value of the property? If it is money or a money equivalent, then that is the fair market value. If it is real estate, or minerals, or another item of property, DHS normally requires two estimates or appraisals of value. These must be within 10% of each other. For real estate DHS will often use the value determined by the office of the county assessor. The goal would be to have a low fair market value be supported by third party estimates or appraisals.
One way to avoid a transfer penalty is to make sure you have made a Medicaid “commensurate return” in exchange for the transfer of property. A commensurate return is actual payment in money (must be documented) either to the Medicaid applicant, or for their benefit (property taxes, medical bill, nursing care expenses, etc.). DHS will not permit the substitution of past or future personal services or labor, or giving a parent rent-free shelter in a child’s home as commensurate return for the property transferred. But there may be ways to structure the care of the individual [I have used a contract with contemporaneous weekly or monthly payments from the individual to the relative caring for the individual] that would be accepted. This would be turning someone who is normally unpaid, into a paid caregiver. This area is very tricky. Expert advice is recommended.
Then there is the question of what is the Medicaid Secret concerning the look-back date. The look-back period is a 60 month rear view look-back from the date Medicaid is actually applied for. If the transfer was made during the look-back it’s gotcha! The transfer will be penalized from the date Medicaid is applied for.
This Medicaid look back is measured back in time from the date of application for Medicaid, as opposed to the date of admission into nursing care or skilled care or the hospital.
The OAC at 317:35-19-20(6)(A) REFERENCE LOCATION provides: “For an institutionalized individual, the look-back date is 60 months before the first day the individual is both institutionalized and has applied for medical assistance. However, individuals that have purchased an Oklahoma Long-Term Care Partnership Program approved policy may be completely or partially exempt from this Section depending on the monetary extend of the insurance benefits paid.” The Oklahoma Long-Term Care Partnership is a program established by the Oklahoma Health Care Authority and the Oklahoma Insurance Department. High quality long-term care insurance that is available through this program.very dollar that an Oklahoma Long-Term Care Partnership policy pays out in benefits, a dollar of personal assets can be protected [additional personal assets that will be excluded when applying for Medicaid]. For example, if a partnership policy is in place and it provides for $100,000 in benefits, and the insured uses all of his or her benefits, then he or she applies for Medicaid, the amount of insurance benefits paid, $100,000, plus the $2,000 personal reserve, will be protected. This is a good way to protect assets. Put in place an Oklahoma Long-Term Care Partnership policy, use the benefits available, and have the protected resource amount increased by the benefits paid from the partnership policy.
If you have long-term care insurance you can find out if you have a partnership policy. It will be stated in the policy itself, or attached to the policy. You could also contact the agent who sold you the policy, or the insurance company for verification. Only extensively trained agents who are listed at REFERENCE LOCATION or LOCATION OF INFORMATION can help you with a partnership policy.
Not everyone can put in place long-term care insurance. Your health must cooperate. If your health is already poor, underwriting will not accept you as a risk. You must apply at an early enough age that you can afford the insurance premium. More information is available about the partnership policies at SOURCE INFORMATION & ADDITIONAL INFORMATION.
Medicaid planning is most effective when it can be done outside of the look-back. That means in advance of needing to Medicaid plan. I usually recommend long-term care insurance be looked into when the first spouse of a couple reaches age 55. However, in addition to considering the use of long-term care insurance, it may be possible to establish a Medicaid Protective Shield Trusts to protect assets. Some assets are important enough to families warrant this. For example, a family farm or business. Maybe it has been in the family for generations. What about minerals that have been passed down for generations. If these assets are not protected, nursing home costs will usually force their sale. Avoid disaster. Protect your family. Protect assets.
Know the Medicaid Secret. Get expert advice from a Medicaid expert. If you need expert advice contact Brent D. Coldiron at BRENT’S WEBSITE and by calling (405) 478-5655. He is an experienced elder law attorney with over 39 years experience in probate, living trusts, wills, elder law and Medicaid planning.