If I settle this debt immediately, will it safeguard those funds, or might they claim it was merely an attempt to shield them? Could I transfer significant amounts to my children instead, though once more, would they view this as simply deflecting attention? Would they then use up these funds after his resources deplete?

The Wife

Related

:
Is it right that my stepmom received all of my dad’s inheritance, and now she plans to leave everything solely to her own children?

Dear Wife,

Mortgage payments do not fall under the five-year look-back rule.

Medicaid operates based on financial need. Generally, eligibility requires that an individual’s spouse has less than $2,000 in assessable resources like savings account balances and investment holdings, along with earnings capped at $2,901 per month ($5,802 monthly limit applies to couples applying jointly). The system scrutinizes transactions from up to five years prior through what’s known as a ‘look-back’ period to ensure one hasn’t transferred assets just to secure assistance; however, this doesn’t always result in automatic disqualification lasting half a decade—it hinges upon details such as timing and amount of asset transfers. Exceptions do apply within these rules—such as using funds for settling liabilities, purchasing health-related equipment, or undertaking modifications aimed at improving accessibility around the house.

“Paying off a mortgage on an excepted asset is typically a wise move,” he states.
Candace Dellacona
, who serves as a principal and shareholder in Offit Kurman’s estates and trusts practice group in New York. “These funds absolutely shouldn’t be given as gifts to your kids since any assets moved within five years before entering a nursing home trigger a ‘penalty period.’ Medicaid calculates the penalty period by dividing the total value of the transferred assets—in this instance, $300,000—by what they call the ‘penalty divisor.’ This figure differs significantly across states because it depends on the average monthly expense for long-term care facilities specific to each state.”

Exceptions to the five-year look-back rule do exist: These encompass settling debts and making modifications for accessibility improvements.

For instance, in New York, the penalty divisor stands around $14,500, whereas in Alabama, it’s about $7,300. She explains further: “If you were to transfer $300,000 to your kids in New York City, this could lead to over 21 months of ineligibility for your spouse; conversely, in Alabama, such a move might cause almost 41 months of disqualification.” The statement continues, “Although Medicaid is federally administered, each state implements these guidelines uniquely. Thus, eligibility criteria, asset limits, and income regulations vary significantly between states. Therefore, seeking advice from an elder law attorney who practices within your specific jurisdiction is crucial.”

Regarding whether Medicaid will “take” your money, it hinges on your location and financial status, according to Dellacona. She explains, “In places like Florida, Rhode Island, New York, and Ohio, a strategy known as ‘spousal refusal’ theoretically lets the spouse who isn’t applying for Medicaid keep their assets and file paperwork refusing to use those funds towards covering the costs for the Medicaid-eligible partner.” However, she cautions, “This method is not foolproof. In these same states, even when a spousal refusal is permitted, Medicaid might still require contributions from the assets of the non-applicant spouse to cover the expenses related to caring for the spouse receiving Medicaid benefits.”

For a potential Medicaid beneficiary, both their 401(k) and IRA accounts are considered when determining eligibility, though these rules can differ from one state to another.

When applying for Medicaid benefits, both an individual’s 401(k) and IRA accounts can affect their eligibility criteria; however, these guidelines differ across states. Typically, a primary residence will not impact eligibility unless its value exceeds specific limits set per jurisdiction. Additionally, most regions allow one car exemption provided it serves commuting purposes, obtaining healthcare services, or caters specifically to individuals with disabilities. Items like art pieces held as investment assets might not qualify for exemption status. However, everyday personal items including clothes, household goods, and engagement/wedding bands often remain outside of consideration when determining financial eligibility.

Several states such as Florida, New York, and California have regulations that allow a principal dwelling to be excluded from assets evaluated by Medicaid under specific conditions. Many states require either yourself or your partner to reside in the house or intend to move back into an unoccupied home should you want this property to stay outside of Medicaid’s assessed assets. Although one’s home typically isn’t factored into Medicaid’s asset threshold, it does not get exempted from Medicaid’s Estate Recovery Program, according to the American Council on Aging. The relevant Medicaid agency might seek repayment for healthcare expenses via what remains of the decedent’s estate, which can include their home.

If you are enrolled in Medicaid and come into an inheritance, for instance, you are required to inform your state’s Medicaid agency about it.

Other stringent regulations apply to Medicaid concerning income and assets: Should you be receiving Medicaid benefits and come into an inheritance, you’re required to inform your state’s Medicaid agency about it. Typically, this disclosure needs to happen within 10 calendar days. An inheritance directly going to your sister might not factor into the calculations 90 days post approval of your Medicaid eligibility; however, if you combine the inherited funds with shared assets, this could impact your spouse’s qualification status.

Certain individuals prepare in advance by setting up an irrevocable trust prior to the five-year review window. When you transfer your possessions into such a trust, they legally cease being yours, making them ineligible for inclusion under Medicaid coverage. However, here’s the caveat: An Irrevocable Income-Only Trust, also known as a Medicaid Asset Protection Trust (MAPT), can safeguard your assets when applying for Medicaid, provided this arrangement occurs outside the specified time frame. This type of trust may encompass items like stocks and bonds, savings accounts and certificates of deposit, along with additional real estate holdings. Establishing a MAPT means relinquishing management over those assets. Additionally, Medicaid has the right to contest the validity of the trust; should this occur, navigating through the process could prove intricate and costly.

I trust this enables you to plan in advance and savor the moments spent with your spouse.

Related:

“He turned out to be homeless and broke”: My uncle tricked my dad into transferring our grandmother’s house. Any advice for me?

You may send your financial and ethical queries via email to The Moneyist at qfottrell@, and follow Quentin Fottrell on X, which was previously called Twitter.


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The Moneyist regrets that he is unable to respond to individual queries.

Earlier articles by Quentin Fottrell:

“I hope Dad could be here”: After winning a $500,000 settlement from a wrongful death lawsuit for my deceased father, an advisor recommended annuities. What should I do with this money?

“I’m torn”: I have two sons—one works diligently and has children, while the other leads an easygoing life as an actor. How should I divide my inheritance between them in my will?

My siblings plan to conceal our mother’s $170,000 savings from Medicaid by putting their names on her bank account. What action should I take?

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