Louisiana Medicaid

Medicaid Eligibility: What If You Transfer Assets, And Then Transfer Additional Assets Later?

We get asked the following question often: "What if I make a transfer out of my name to other individuals, or to a trust, and then I transfer additional assets out of my name at a later date? Which of these assets will be protected? How will this affect my long term care Medicaid application or eligibility?

One of the biggest threats to a person's estate is that they will be forced to deplete their estate while they are alive due to long term care expenses, and then the state will exercise it's estate recovery rights when they die so that the children or other heirs will not be able to inherit the family home.

Many people transfer assets to individuals or certain kinds of trusts while they are alive in an attempt to "protect" those assets from nursing home expenses. However, the complicated Medicaid eligibility rules make it difficult for people to take the actions they want or need to take to protect their estate.

One area that causes a great deal of confusion is when an individual makes multiple transfers at different times. Let's take an example: Let's say Joan transfers assets having a value of $400,000 on January 1, 2016. Then, on January 1, 2020, Joan transfers an additional $50,000. Then, on March 1, 2021, Joan moves into the nursing home and applies for Louisiana Long Term Care Medicaid. The following is the analysis that takes place.

An inquiry will be made to determine whether Joan had transferred any resources in the previous five years. The only resource transferred in the previous 5 years was the $50,000 transfer on 1/1/20. Since a transfer had taken place in the previous 5 years, a transfer of resources penalty period must be determined. In order to determine the penalty period, one must divide the value of the resource transferred ($50,000) by the average monthly private pay rate (determined to be $5,000), rendering Joan ineligible for Medicaid for 10 months beginning with 3/1/21 (the date of Medicaid application and otherwise eligible except for the transfer).

Many people, once they realize the application of the rules to the multiple transfers will conclude that the $400,000 is protected but the $50,000 is not.

So, what should Joan do? One option is to have the $50,000 returned to her and spend that prior to Medicaid application. The Louisiana Long Term Care Medicaid Manual provides that the uncompensated value of a transferred resource is not counted if the original resource is returned.

Or, Joan could apply for Medicaid, get denied originally, and then be eligible for Medicaid 10 months later. Or, she could go through the complicated and often mis-understood process of applying, getting denied, and then returning part of the resources to reduce the penalty period, pursuant to the rule which states that if only part of the asset or its equivalent value is returned, the penalty period is modified but not eliminated.

None of these legal strategies should be attempted by the lay person who does not have an excellent working knowledge of the Medicaid Eligibility Manual. The key in protecting your estate is to start early, work with the right people, and get it right the first time. One mistake could make things really difficult for your spouse, children, and grandchildren.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

In Some Rare Circumstances, Last Minute Medicaid Planning Is An Option

I was working with a family today. Dad was in the nursing home getting rehabilitation. Elderly Mom was still living at home, and she is too fragile to be able to take care of Dad if he comes home after rehab. Mom and Son said Dad weighed about 230 pounds, and Dad would need someone around the clock to care for him. Dad is likely to live in the nursing home until he dies.

Mom was disappointed because she expressed how hard Dad had worked over the years to save some assets to pass along to their children. They owned a paid-for home, and they had another roughly $230,000 of life savings. We discussed how, normally, people in a nursing home have to spend all of their savings until they have less than $2,000 remaining. She also told me that the nursing home in Lake Charles, Louisiana, would cost her husband $5,400 monthly. She could foresee their life savings that they had spent seven decades saving - wasting away.

We discussed a particular legal strategy that would enable them to save Mom about $175,000 of her $230,000. The only way this strategy works is that if the bulk of the non-home assets are liquid, and there is a child or children that will cooperate with the plan. The legal strategies are very complicated, but it involves:

  1. The parents transferring their Countable Resources to other parties;
  2. The parent applies for Long-Term Medicaid - and gets denied due to the transfer of resources. Medicaid will assess a penalty period that lasts a number of months;
  3. Assets are returned to the parents to reduce the value of the original transfer, thus reducing the penalty period;
  4. Parent spends the returned funds on their care.

All of this is very complicated and there is a significant amount of documentation that is necessary. One mistake can cost the family their entire life savings and perhaps even their home.

Taking advantage of legal strategies to protect your assets from losing to the nursing home is most effective when you plan ahead - at least five years before a nursing home situation. Since no one knows if - or when - they will go into a nursing home, it's difficult to determine when you should engage in Medicaid planning. But we know that the sooner you take the right action, the better.

But if you have a relative who is in the nursing home right now, or they are within days of going into the nursing home, and they have cash assets of $120,000 or more, you may want to give us a call so that we can help you determine if there are actions you can take within the rules of the Louisiana Long Term Care Medicaid Manual to protect what you've save for yourself and your loved ones.