Gifting and Transferring Assets to Qualify for Medicaid

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• Assets and the Look-Back Period
• Can I Sell or Gift an Asset Within the Look-Back Period?
• Period of Ineligibility

It’s common for seniors to consider giving away assets to family members for eligibility purposes while planning toward eventual application for Medicaid benefits, because coverage is restricted to those with limited assets. If a senior makes a transfer during the “look-back” period, they risk losing Medicaid coverage for a period of time. However, according to Medicaid law, not all gifts or sales are prohibited within said period. Those considering applying for Medicaid soon must understand what is and is not allowable.

Assets and the Look-Back Period

The look-back period, or penalty period, is the time during which gifts or sales of assets will be evaluated to determine any exemptions. The period is limited to the five years prior to the month during which Medicaid was applied for. Assets are defined by the Florida Medicaid Program Manual as items of value that are owned (single or jointly) by a Medicaid applicant who has access to the cash value upon disposition. Assets include liquid assets—which are cash assets, or assets that are payable in cash on demand—and non-liquid assets, which are countable assets that cannot be readily converted to cash. The asset limit for a Florida Medicaid recipient is typically $2,000 ($3,000 for a couple), but, in some cases, it’s $5,000 ($6,000 for a couple).

Can I Sell or Gift an Asset Within the Look-Back Period?

For gifts, typically, the answer is no: You cannot gift an asset during the look-back period for Medicaid. It’s considered a gift, or “transfer of assets,” when the applicant or their spouse does not receive fair compensation in return for the asset. Under the Medicaid rules, the transfer within the look-back period is presumed to be made for the purposes of Medicaid planning. However, in some cases, an applicant can gift or sell an asset within the look-back period and not suffer a period of ineligibility under Medicaid transfer rules. The applicant is required to demonstrate one of the following reasons to overcome the presumption:

• The individual intended to dispose of the assets either at fair market value (FMV) or in exchange for other valuable compensation—for example, support and/or maintenance.
• The asset was transferred solely for reasons other than to become eligible for Medicaid.
• The transfer was considered to or for an allowable annuity.
• The transfer was toward allowable homestead expenses.
• The transfer was between spouses.

The transfer is for court-ordered support.

• All assets transferred for less than fair market value have been returned.
• Imposing the transfer penalty on the individual would place an undue hardship on the individual.

The law additionally requires the qualifying applicant provide convincing evidence of one of those reasons. This is a high threshold to meet, and it means the evidence must be clear and leave no margin for doubt that it is an exempt assets.

Period of Ineligibility

Applicants who make an improper gift or sale are subject to a period of Medicaid ineligibility. During this time, Medicaid will generally not cover costs. The period will depend on:

• The amount of uncompensated value from the transfer
• When the transfer occurred
• The average private nursing home and long-term care costs

Dividing the uncompensated value by the average nursing home costs will equal the period of ineligibility. A short period of ineligibility may not be harmful to an applicant, or a Medicaid penalty may be unavoidable in some situations. However, a longer period of ineligibility could impact a senior’s care. Seniors and their loved ones should contact a law firm or an experienced Florida elder law attorney for legal advice to plan ways to avoid a longer period of Medicaid ineligibility and be able to make informed decisions about nursing home care. For more information on this area, see our overview of elder law and estate planning.