Qualify For Medicaid By Transferring Assets

By Author: Annuity Zing
Total Articles: 13
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Clearly, Medicaid will pay only if you have few assets. Logically, then, make sure you don't have assets. Therefore, transfer your assets to your children now. This will make you poor, and by being poor, you'll qualify for Medicaid.

If you dont' transfer your assets to your children, you'll just spend everything you own on long-term care costs until you have nothin left anyway. Either way, you'll be broke. So wouldn't you rather give your assets to your kids instead of to a nursing home?

Four problems with transferring assets

If you think this sounds reasonable, watch out for these four big problems:

Problem #1: Yeah, Right
You'll find it very hard to give everything you own to your (spoiled rotten!) kids just as you've reached that time in your life when you can start enjoying yourself. In other words, this recommendation, um, usually doesn't go over very well.

Try convincing your parents to give you all their money.

"No, really, Dad, you need to give me everything you own right now. It's for your own good!" Yeah, righht.

Problem #2: Medicaid is aware of this trick

If ...
... you made gifts during the 36 months prior to filing your claim for benefits, Medicaid will deny this claim - 60 months for gifts you make to a trust. This rule is specifically intended to prevent people from asset-shifting. And please note an important change in Medicaid rules: If you file a claim at any time during the 36-month waiting period, Medicaid will restart the clock. Therefore if you plan to use this strategy, assets must be transferred well in advance of the need for long-term care, and be sure you don't file a claim until you're sure the 36-month waiting period has expired. Also, be aware that transfering assets to a spouse does not shield the assets from Medicaid.

Have you brought assets into your marriage?
Many people who marry later in life bring assets into the marriage, like Ruth. Her husband died when she was 47, leaving her his 401(k), their home, plus life insurance proceeds. Five years later, Ruth remarried. She kept all her assets in her name and filed a separate tax return. When her second husband needed long-term care, he quickly spent down all his assets. But Medicaid permitted Ruth to keep only $2,000 per month; all her other income had to be spent on her husband's care before Medicaid would pay benefits. Thus, over the next several years, Ruth was forced to spend down to the poverty level, too.

Regardless of whose money it was or where it came from - inheritances, savings, retirement plans, or insurance proceeds - Medicaid will deny claims until both spouses spend virtually all their money on long-term care. The fact that the money originally belonged to the community spouse does not matter.

Problem #3: Attempts to asset-shift are stymied by the IRS
Under gift tax rules, you may give to any one person only $11,000 per year (you may give unlimited amounts to your spouse). So, even if you try to give your money away, the IRS will restrict the speed with which you may proceed.

Problem #4: This strategy is unethical...
Please remember that Medicaid is funded by taxpayers to help the truly needy of our society - not as a middle class tax dodge to protect your assets.

Problem #5: ...and Illegal, too!
Congress knows that few consumers have the imagination or knowledge to effectively execute an asset-shifting strategy. So, to discourage professional advisors from sharing this information, Congress passed a law that made it a felony for advisors to counsel or assist consumers in their efforts to shift assets. Therefore, don't bother asking your lawyer, accountant, or financial advisor for help; the smart ones won't provide it.

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