Timing of Transfers under Medicaid

April 13, 2006

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When determining whether certain transfers invalidate eligibility for Medicaid, federal law provides for a three-year "look-back" period for transfers made to individuals. The period is five years for transfers into a trust.

Some time ago, transfers into a trust for the benefit of the applicant were acceptable planning tools. However, federal law has been changed to make trusts largely ineffective here. To be effective, the transferor must relinquish all control, interest and incidents of ownership in the property transferred to a trust. This, coupled with the longer look-back period, may make transfers to individuals the better alternative.

Transfers to individuals during the three-year period do not automatically disqualify the applicant from qualifying for Medicaid benefits. Certain transfers are exempt, and others, because of their limited size, may only be penalized, disqualifying an applicant only for a limited period of time of less than three years. Certain amounts of income are also exempt.

Of course, transfers to an individual more than three years prior to an application for Medicaid will escape scrutiny entirely. This is the best course of action, when planning can be done that far in advance, and the transferor is amenable to parting with some assets in favor of children or other relatives.