Medicaid Planning Traps: “Pattern” Gifts
It may be cliché to portray Medicaid caseworkers as a massive machine or computer but rest assured, when it comes to any financial “help” or “gifting,” it is searching for a pattern. By default, gifts (or as the regulations like to refer to them, transfers for less than fair market value) cause ineligibility for Medicaid. As a practical matter, these transfers are not handled uniformly by individual counties or even individual caseworkers. We do have a few bits of guidance, though. Transfers that are not made “for the purpose of qualifying for Medicaid” will not be penalized, although it is difficult to convince a caseworker that large transfers meet this definition. It is far better to have a relatively consistent pattern of gifts made over a period of time longer than the “lookback” period. Nobody wants to see sudden, obvious, large sums of money clearly maneuvered for the purpose of avoiding paying for healthcare.
Imagine the government as just another family member, one that you are asking to pay for the cost of your healthcare. That family member will naturally be interested in how much money you have at the time you make your request. He or she will take notice if you have done anything drastic to make it seem as if you are a “pauper on paper.” As simple as this explanation may sound, changes in Medicaid restrictions in recent years have greatly complicated and limited Medicaid planning. Many elders caught in the middle of these changes found their options very suddenly limited. If that elder was never in the regular habit of passing on sums of money to family members, it was clearly too little, too late. Going forward, one cannot begin thinking about Medicaid planning too soon.
Who wants to appear poor? No one does, at least not until the government wants your money. That’s why people approaching years of needing senior care are desperate for strategies to unload assets. That’s also why the government has imposed stricter regulations. The most significant countermeasure has been the change of the “lookback” period from three years to five years. Any money in motion during this period is under scrutiny and leaves elders and their loved ones open to penalty periods. So many have tried their best to outsmart the government, and lawyers like to think they can find different ways of hiding wealth within the words of the regulations. It is a constant game of “can you top this?” between the government and the private taxpayer.
The most significant response from the government has to be the change in start date for penalty periods. In the past, if one of your transfers was caught during the “look back” period and you were issued a penalty, that penalty would begin at the date of transfer. This meant the penalty could be over by the time you actually apply for Medicaid. New rules state that the period begins as soon as you apply for Medicaid. All of your planning and maneuvering will likely be done by this point and you will be left waiting for the duration of the penalty period before you can begin long term care. If you're still looking for a creative solution to an asset protection problem at this point, please feel free to contact this office so we can discuss sound strategies for you or your loved ones’ long term healthcare.
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