Are There Penalties For Transferring Assets Under The Medicaid Rules?
Under Medicaid rules, there are penalties for transferring assets within the five-year look-back period. With the five-year look-back period, the state of Florida is looking for uncompensated transfers. Uncompensated transfers are essentially gifts and giving money away. It is very important to realize that Medicaid rules are different than IRS tax rules about gifts. You may be allowed to gift under the tax rules, but Medicaid rules will penalize gifts. If there are any uncompensated transfers within five years of applying for Medicaid, the state of Florida can assess a penalty period or delay of Medicaid benefits.
That penalty period and delay of Medicaid benefits are calculated at a rate of adding up the total uncompensated transfers and then dividing by the transfer penalty divisor, which is currently $9,171. The number $9,171 is the average private-pay nursing home rate in the state of Florida. If you were to give away a gift totaling $92,000, we would take $92,000 and divide it by the penalty divisor of $9,171. You would be left with approximately a 10-month penalty period, where you would have to privately pay the nursing home. At the end of that 10-month period, as long as you met the Medicaid eligibility requirements, Medicaid eligibility would begin.
What Are The Income And Resource Levels For Medicaid?
The Medicaid income and resource levels change from year to year and are different for a single person, a married couple where one spouse is looking for Medicaid, and a married couple where both spouses need Medicaid. If you are in the state of Florida, starting January 2019, if your gross income exceeds $2,313, you will have exceeded the income limit for Medicaid. If your gross income exceeds that amount, all hope is not lost. You can seek an elder law attorney to create a qualified income trust to maintain your eligibility despite your higher income. If you are married with one spouse needing nursing home care, then the spouse requiring nursing home care’s income would need to be below $2,313. If it exceeds that amount, then that spouse will need to create a qualified income trust with an elder law attorney. If both spouses are in a nursing home in Florida together and their combined gross income exceeds $4,626, then a qualified income trust will also need to be created.
The asset limits in Florida depend on what is countable and what is non-countable. In the state of Florida in 2019, for a single person, the asset limit is $2,000 of countable assets. For a married couple with one spouse needing care, the asset limit for the spouse in the nursing home is $2,000 and the spouse that is living outside of the nursing home’s asset limit is $126,420 of countable assets. If both spouses require nursing home care, the asset limit is $3,000 total of countable assets for both spouses.
What Is The Difference Between A Revocable And An Irrevocable Trust?
The main difference between a revocable trust and irrevocable trust, in the context of Medicaid, is that a revocable trust counts against Medicaid eligibility. A properly structured irrevocable trust will not count against the person in determining his or her Medicaid eligibility. The main concern for an analysis on an irrevocable trust is whose money funded the irrevocable trust. The next focus is for the Medicaid applicant. What level of access and control does that Medicaid applicant have over that asset? If the Medicaid applicant has an entitlement to an asset and resource distribution from that trust, then Medicaid counts that whole trust against the Medicaid applicant. If the Medicaid applicant has income rights but not rights to the principal, then the total combined assets of the trust do not count against the Medicaid applicant, but the income paid from the trust must go towards the nursing home bill.
In all cases, a revocable living trust that you create and have direct access to and direct ability to change will be a countable asset against your Medicaid eligibility. That’s a common question and misunderstanding. The proper way of protecting your assets ahead of time from nursing home costs is by using a correctly structured irrevocable Medicaid asset protection trust.
For more information on Penalties For Transferring Assets Under Medicaid, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.
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