In general, one cannot give away her assets and go on Medicaid within the next five years. If an individual who gives away assets (donor) applies for Medicaid within the sixty month period following the date of the last completed gift, the individual will usually be subject to a period of time during which Medicaid will not pay for their long-term care. The length of this period is related to the amount of the total gifts during the five year Medicaid look back period, and is referred to as a Medicaid penalty period.
An exception to the Medicaid penalty period and any Medicaid liens is the transfer of a home by an ill parent to a caregiver child. If the child moves into the home of the parent, and provides such care to the parent for a continuous, two year period as will keep the parent from entering into a nursing home, then the parent may transfer the home to the child without any penalty period. This authority for this exception comes from the federal Medicaid statute and is black letter federal law.
Since 2015, I have heard of several instances where a parent applying for Medicaid was awarded the caregiver child exemption while the parent was alive, and pursuant to the exemption, the home was transferred out of the parent’s name to the child.
After the parent’s death, the child is notified that the house is nevertheless subject to a Medicaid lien.
This should not be the case for several reasons. First, when the parent gives up any interest in the home by giving the home away to the caregiver child, the home is now beyond the parent’s future Medicaid estate and it cannot be subjected to a Medicaid lien.
In addition, any attempted claw back of the home into the deceased parent’s Medicaid estate, after the parent was previously determined eligible for Medicaid without any penalty imposed for the home transfer, denies the parent, the child and all subsequent third party bona fide purchasers of the home for value from the child, of due process without notice and an opportunity to be heard. As a policy matter, these reports are very troubling because of the loss of evidence over the passage of years and because the new “policy,” which was not enacted with public rule-making, will seriously undermine the stability of real estate transactions statewide.
Options may include challenging the new notice in the Chancery Courts. For an assessment of your options, consult an experienced and knowledgeable elder law attorney.
Questions? Let Jane know.
Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.