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Two States Are Making Medicaid Transfers More Difficult
- July 26th, 2005
A new Connecticut law, which went into effect July 6, 2005, may have made Medicaid transfers more difficult in that state and, if it stands, sets a disturbing precedent for other states. A similar law in Iowa has already had a major effect on Medicaid transfers.
As we explain in our section on "Medicaid," federal law has put limits on when individuals can transfer assets and still qualify for Medicaid. People who transfer assets without receiving fair value in return are subject to a period of Medicaid ineligibility '“ called a "penalty period" -- which is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
The new Connecticut law goes further and provides that if you make a gift that causes a penalty period under Medicaid, the gift is presumed to have been made so that you could qualify for Medicaid. Under the new law, you or the person you transferred your assets to will have to repay the state for either the cost of care paid for by the state after the transfer date or the amount of the transfer, whichever is less.
For example, if you transfer $10,000 and the average cost of nursing home care is $5,000, you would have a two-month period of ineligibility for Medicaid. In addition, you (or the person you transferred the money to) would have to repay Medicaid $10,000 (or the amount of the cost of care, whichever is less).
According to Connecticut ElderLawAnswers member attorney Paul Czepiga, the Connecticut law may violate federal law, but even so, it will have a chilling effect on transfers. According to Attorney Czepiga, how the state enforces the law remains to be seen, but in the meantime, the only way to be safe is to plan ahead. If you make a gift, you may need to wait three to five years (the length of time Medicaid will look back for any asset transfers) before applying for Medicaid.
Iowa has a similar law that provides that if you make a gift and then apply for Medicaid within five years (regardless of the penalty period), your children may have to repay the state for the amount of the gift.The effect of this law has been to eliminate gifting as a Medicaid planning tool. Instead, individuals who are going into a nursing home either have to add to or improve property that is exempt from Medicaid eligibility or spend their money until they meet the Medicaid eligibility threshold.
To read the full text of the Connecticut law, click here.
To read the full text of the Iowa law, click here.
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