As you most likely know, Medicaid programs are abundant, but we are going to discuss particularly Medicaid as it relates to paying for long-term care, such as skilled nursing care. However, there are strict rules about who is eligible for long-term care Medicaid, and one of those rules is about what is considered gifting.
If you give away money or assets within five years of applying for Medicaid, you will be penalized. The penalty is a period in which Medicaid will not pay for room and board in a skilled nursing facility, which means that you will have to pay for your long-term care until the penalty period is over. The penalty period is calculated by the amount of money or assets that you gave away. For example, in 2023 there is a penalty month for every $9,939.00 that is gifted. For example, if you were to give away a property valued at $99,390.00 you would have a 10-month penalty that you are responsible for your stay at a skilled nursing facility.
Penalties can come from not just giving money away, but from paying for your care inside of your home, as you try to avoid going into a skilled nursing facility. A well-meaning senior can unknowingly land in hot water with Medicaid by paying a neighbor or friend to help with chores around the house or for transportation to medical visits.
Case Study: Betty Jensen
Betty Jensen was a Michigan resident who was penalized for paying for in-home care. Jensen intended to stay in her own home for as long as possible, but her efforts resulted in a penalty that sparked a change in the state's Medicaid rules. Jensen's case illustrates the dangers of Medicaid gifting. Jensen paid a caregiver for her in-home care for 10 months, but when she eventually applied for Medicaid, she was denied because the state determined that she had given away assets within the five-year look-back period.
Jensen's case attracted media attention, and it helped to raise awareness of the dangers of Medicaid gifting. In response to Jensen's case, the Michigan legislature passed a law that exempts certain types of in-home care payments from the Medicaid gifting penalty.
Tips for Helping Clients Avoid This Expensive Mistake
- When working with clients who are considering Medicaid gifting, it is important to educate them about the risks and penalties involved.
- Be aware of the Medicaid look-back period. The look-back period is the period before a person applies for Medicaid during which the government will review their financial transactions for gifts. The look-back period is currently five years.
- Work closely with an elder law attorney. This will help you provide your clients with comprehensive and well-rounded advice.
- Even better – refer your clients to a certified elder law attorney, who is experienced with Medicaid planning and many nuances that could help protect their assets and quality of life.
If one of your clients, or their aging family members, is facing the possibility of long-term care. It’s important to start preparing now. Hopefully, the information in this article will help to open the door to having this important conversation. Please know the team at Mannor Law Group is happy to help your clients anytime.