Saturday, September 29, 2012

When a nursing home patient applies for Medicaid assistance, he is asked to report any gifts or transfers made in the FIVE YEARS immediately prior. These transfers are called "divestments" and will result in a penalty period for the nursing home patient, preventing Medicaid eligibility.

A little known exception to the "5 year lookback rule" is that transfers to a disabled child are NOT considered divestments.

When I meet with a family to discuss long term care issues, we always discuss the health of the entire family. A disabled child or grandchild may provide an important planning opportunity for a parent who enters a nursing home. As an example, I recently met with family who had placed their widowed mother in a nursing home.

Mother had assets that she wanted to pass to her family rather than spend on the nursing home. Because of her son's disability, mother could transfer her assets to the son without being penalized by Medicaid. The family agreed the disabled son would hold the assets in trust until mother passed away, and then distribute the assets pursuant to mother's wishes on her death.

This little known exception to divestment rules can be an effective planning method for families facing long term care issues. If you've got questions like this and need someone to help get you the right answer, be sure to contact me and I'll be happy to help.