Is It Ever Too Late To Do Medicaid Planning?

By Anthony J. Enea, Esq.*

I recently consulted with the family of a woman who has been residing in a local nursing home for the last two years and had spent approximately $200,000 of her assets paying for her care. The family advised me that they had consulted with their family attorney at the time of her admission to the home, and were advised that it was too late to do anything to preserve the assets. Their attorney had advised them that the transfers had to be made at least three years prior to her admission into the nursing home in order to obtain Medicaid.

Unfortunately, the advice that the family received was incorrect. However, it is typical of the misinformation and misconceptions surrounding the transfer of asset rules for Medicaid eligibility. The "three-year rule" is often repeated by many attorneys, accountants, health care professionals and others, but, rarely understood. Specifically, in the case of the aforestated family, at the time of mom's nursing home admission and even afterward, it would have been, and is possible to protect a large percentage of mom's assets from the cost of the nursing home by making transfers of those assets.

For many years elder law practitioners have relied on the "rule of halves" as an axiom of the planning permitted. In simplest of terms, you advise the client to transfer one-half of the assets and the remaining half should be sufficient to pay for the cost of the nursing home during the period of ineligibility for Medicaid created by the transfer. In recent years, because the average cost of a nursing home (regional rate) utilized by Medicaid in calculating the period of ineligibility for Medicaid has fluctuated and the cost of nursing homes has increased, the rule of halves has shrunk to what I refer to as the rule of approximately 42% to 45%. The period of ineligibility for Medicaid created by the transfer is determined by taking the dollar value of the uncompensated transfer of assets and dividing it by the average cost of a nursing home in the County where the applicant resides as is determined by the Department of Social Services. The applicable rate for Westchester County for 2001 is $7,464.00 per month, thus, if $100,000 is gifted ($100,000) $7,464), a period of ineligibility for nursing home Medicaid of approximately 13.4 months is created by said transfer.

Contrary to the popular misconception, all transfers do not automatically create a 36-month period of ineligibility. While the maximum period of ineligibility created by an outright transfer of assets is 36 months, assuming no application for Medicaid is made until the 36 months have expired, it is possible to create periods of ineligibility which are less than 36 months.

Thus, with respect to the aforedescribed family, even though mom had been in the home for two years, it was still possible to protect anywhere from 42% to 45% of her remaining assets from the cost of the nursing home. As can be seen, it is never too late to do the Medicaid Planning. Even when you are in the nursing home, it is still possible to protect a large percentage of the client's assets. However, the best advice is to engage in this time of planning before.