If you are considering the possibility of nursing home care in the near future, you may have heard of the concept of reducing your assets to qualify for Medicaid benefits. The process of reducing one’s assets to qualify for Medicaid carries significant risks that require the guidance of an experienced elder law attorney.
Simply having transferred assets out of your name within five years of applying for Medicaid triggers penalties that can make individuals ineligible for Medicaid for a certain period of time. It is not just that transfers were made during the previous five years, but the total amount of the transfers within five years that determine how long individuals may be ineligible for Medicaid benefits. If the value of transferred assets is high enough, then individuals may not become Medicaid eligible for many years. These transfers, originally intended to qualify someone for Medicaid, may end up leaving individuals in the position of having neither Medicaid eligibility nor the ability to pay for care themselves.
The mere act of transferring funds presents an additional risk since once you transfer funds, they are no longer yours to control. You may think that your children can hold the money to provide for you, but even if they fully intend on holding the money for you, they may have their own setbacks and emergencies that cause them to lose the money or assets you transferred to them. Ultimately, the only assets you can count on for your retirement are the assets you own.
Additionally transfers to children can have negative consequences for the transferee. Additional assets may make it more difficult for their children to qualify for college financial aid. Transfers of appreciated assets, such as stocks or real property, can have negative tax consequences since assets that transfer from an estate receive more favorable tax treatment compared to assets that are transferred during one’s lifetime.
In some cases not transferring any assets at all may be the most effective strategy. To determine what your best strategy is, please consult with an experienced elder law attorney.