In order to qualify for nursing home Medicaid benefits, individuals often transfer/gift assets. As a result of the gift, a period of ineligibility, commonly referred to as a “penalty period,” is imposed. The penalty period now begins when an individual goes into a nursing home (if it is within 5 years of the transfer), applies for Medicaid benefits and has assets below allowable levels.
The length of the penalty period is determined by dividing the amount gifted by the regional nursing home rate, i.e. the rate for the nursing home in the county in which the individual is institutionalized. The 2008 regional rates are as follows: New York City - $9,636; Long Island - $10,555; and Northern Metropolitan (including Dutchess, Rockland, and Westchester) - $9,316.
Hence, for example, if a New York City applicant gifts $96,360, he will be ineligible for Medicaid nursing home benefits for 10 months commencing when the applicant is in a nursing home, has assets of no more than $4,350 (plus other “exempt assets” such as IRAs in pay status) and has applied for Medicaid nursing home benefits. If the individual gifts assets in March 2008, but doesn’t go into a nursing home and apply for Medicaid until February 2009, the period of ineligibility will run from March 2009 until January 2010.
When calculating a penalty period, the Medicaid agency must use the rates in effect for the year in which the individual applies for Medicaid. The regional rates change each year and are updated annually, effective January 1. As such, an increase in the regional nursing home rate creates a shorter penalty period.
Penalty periods for gifts made prior to February 8, 2006 (the effective date of the “DRA”, the Deficit Reduction Act of 2005) begin the month after the transfer. It is not a requirement that the applicant reside in a nursing home for the penalty period to start if the gift was made prior to February 8, 2006. Hence, if an individual transferred assets prior to February 6, 2006, the penalty period has already started and may very well have even expired at this time. For example, if an individual gifted $96,360 in December 2005, he or she was ineligible for Medicaid for 10 months from January 2006 until November 2006.
For gifts made on or after the effective date of the DRA, i.e., February 8, 2006, if an individual resides in the community, calculation of a period of ineligibility will not begin until the individual enters a nursing home. The DRA also increased the “look-back” period, the period during which Medicaid looks back at one’s financial history, to 5 years. Therefore, if an individual goes into a nursing home within 5 years of transferring assets, a penalty period will be imposed.
Before engaging in a plan to protect one’s assets, it is important to consult and Elder Law Attorney who can provide appropriate advice in light of these transfer rules and other complex rules and regulations brought about by the DRA.
Ronald A. Fatoullah, Esq., CELA is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts and wills. The firm has offices in Forest Hills, Great Neck, Manhattan, Brooklyn and Cedarhurst, NY. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also serves on the Executive Committee of the Elder Law Section of the New York State Bar Association. Fatoullah chairs the Legal Committee of the Alzheimer’s Association, LI Chapter and serves on its Board of Directors. He is also a co-founder of the Senior Umbrella Network of Queens, and currently serves on its Board of Directors. This article was written with the assistance of Stacey Meshnick, Esq., a senior staff attorney at the firm. Meshnick supervises the Medicaid department at the firm. The firm can be reached by calling 718-261-1700, 516-466-4422 or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.
*Certified as an elder law attorney by the National Elder Law Foundation.
