What Will Happen if Medicaid Says I Transferred My Assets to Qualify for Benefits?

Medicaid can withhold eligibility for months or even years if you transferred assets within five years of applying for Medicaid coverage of long-term care.

Because one must meet strict asset limits to qualify for Medicaid, some seniors headed for a nursing home in the future try to give away their assets in order to qualify for Medicaid. But Medicaid frowns on people who give away assets that could have been used to pay for their own care.

Here’s how this works: Individuals anticipate that they may need assistance paying for long-term care, and they don’t want to lose any of their assets just to get Medicaid benefits. So they decide to give away some of their assets to someone, usually a family member, to reduce the value of their estate. They probably heard of other people doing that and ending up on Medicaid, so it should work for them, right?

Wrong. Medicaid is a “payer of last resort” and requires that all other sources of payment be exhausted before Medicaid will pay for long-term care expenses. With a few exceptions, if you give away assets, you will be ineligible to receive Medicaid benefits for long-term care for a period of time after applying for Medicaid. In most states, including California and New York, this period of ineligibility does not apply to Medicaid-paid home care, but only to nursing and assisted living facilities. (Call your local department of health services to find out if the penalty applies to home health care or other community-based health care services in your state.)

Medicaid Transfer Rules

The Deficit Reduction Act of 2005 (DRA) imposed a period of ineligibility on those who gave away assets within five years of applying for Medicaid benefits. What is most powerful about this ineligibility period is that it begins when the individual applies for Medicaid (and would otherwise qualify for Medicaid but for the gift).

For example, if a Medicaid applicant in need of a nursing home made a gift of $11,000 4

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