It is one of the most common questions and probably the least understood of issues. Under certain circumstances, yes, you can give away property to qualify for Medicaid. But it has to be with proper planning.
A good case in point is one of our recent cases. But first, what is a gift? It is any transfer that is made without valid or adequate consideration. As an example, if I gave you my vehicle valued at $20,000, it would be a gift. But what if you paid me $10,000–is it still a gift? Yes, to the extent the value exceeds the consideration–in this case $10,000.
Many of you have heard of the 36 month rule. Many of you believe it means that if you give away property, you are disqualified from Medicaid for 36 months. It even becomes more complicated if you give it to a trust. But the 36 month rule is not that simple.
Lets take our recent case in our office. Bob cares for his mother, Margaret. Margaret’s health was failing for many years, especially her eyesight. In January, 2002, Margaret decides she is going to end up in an assisted living facility. With Bob’s assistance, she sells her home, automobile, and extra furnishings. She has some cash and an annuity. After liquidated her property, she had $72,000 in cash. In March, she gives half of the money to various grandchildren, and the other half, $36,000, she then gives to Bob, her only surviving child.
In October, 2004, Margaret falls and is hospitalize. It is apparent she will need long term care after she is released from the hospital and will not be able to return to the assisted living facility.
Bob is concerned. It has been only about 30 months since the gifts to the family–not the 36 months he was told about. Plus, he had heard that with an annuity, it might be 60 months. And finally, the gift to Bob exceeded $10,000 in one year and he heard $10,000 was the limit.
Bob has been assisting Margaret with the cost of the assisted living facility, but at $3400 a month for the rest home, he just can not do it.
Things are going to work out for Bob. First, the $10,000 gifting limit (now $11,000) has no bearing on Medicaid law–they simply are not related.
Second, the annuity was a complete gift and did not trigger the 60 month provision concerning transfers to trust.
Finally, the 36 month provision must be explained. When you make application for Medicaid, you will have to reveal all transfers during the 36 months prior to the application (60 months in the case of transfers to a trust). If there were transfers without consideration, that will be considered a gift. The value of the gift will disqualify you for a period of time. However, there is a divisor that SRS uses in determining the period of time that you will be disqualified from Medicaid benefits. It is $3000.
Before we made the application for Medicaid on Bob and Margaret’s behalf, we calculated the disqualification period.
The gifts totaled $72,000. Divided by $3000, the disqualification period is for twenty-four months. After April, 2004, Margaret was eligible to apply for Medicaid, though she did not need it until November.
Happily, SRS accepted and approved the application by Bob on the first go around.
WARNING: If the gifts had been $172,000, the disqualification period would have be 57.33 months. If Bob came to me only 30 months after the transfer, then we would not have applied for Medicaid until after 37 months after the gifts. Why? SRS only looks back 36 months. If we apply during the 30th month, then we will be disqualified for another 27.33 months. By waiting until month 37, though we may have had to pay 7 months of nursing home, we are immediately eligible, saving ourselves 20.33 months of nursing home bills!