Typically, the transfer of assets causes ineligibility for Medicaid coverage of nursing home care for up to five years after the gift. The return of the transferred funds in effect “cures” the gift and eliminates the period of ineligibility. However, then your mother-in-law will have money that will have to be spent down on her care before she will be eligible for Medicaid. These are the main rules.

However, there are exceptions – such as transfers to children with disabilities and transfers for purposes other than to qualify for Medicaid – and calculations that may reduce the amount that needs to be returned. For instance, if the gifts were made early in 2010, the family members may only need to return enough to pay for care until five years after the date of the gifts. I strongly recommend that the family consult with a local elder law attorney to determine the best strategy in your situation.

For more on Medicaid's asset transfer rules, click here.