How Does Gifting & The Medicaid Look Back Period Affect Eligibility In Pennsylvania
by SELadmin | Feb 15, 2022
This blog post is the seventh chapter of a series entitled How to Qualify for Medicaid in Pennsylvania that focuses specifically on gifts and the look-back period. Qualifying for Medicaid can be confusing and complicated, but this guide explains it in plain English. If you would like to order a copy of the complete guide .
NOTE: The Medicaid numbers used in this post are those in effect in February of 2022.
Before learning how to spend down to qualify for Medicaid, you need to know the rules about how the state penalizes the gifting away of assets.
Seek Help With Medicaid Application And Spend
Medicaid is a very complex government program. Just because a seniors assets exceed the general limits listed above does not mean they are automatically ineligible for coverage. Different states implement slightly different rules and resource limits, and an elder can devise a personalized asset spend-down strategy to meet their states eligibility criteria.
In addition to asset limits, there are many other guidelines for calculating countable income and determining ones medical need for care and assistance. Furthermore, different financial rules apply for married couples. It is recommended to familiarize yourself with these eligibility requirements early on in case you ever need to help an aging loved one apply for Medicaid .
Working with a certified elder law attorney who has extensive knowledge of the unique Medicaid program in your state and is well versed in legal and financial Medicaid planning strategies is crucial. In most cases, handling the application process without any professional assistance can result in a determination of ineligibility and even a costly Medicaid penalty period.
Transfer Of Assets Rule Applied To Income
Income, in addition to resources, is considered to be an asset for transfer purposes. When an individuals income is given or assigned to another individual, the gift or assignment is considered a transfer of assets for less than FMV.
The CAO must evaluate a lump sum transfer to determine whether there was a transfer of an asset for less than FMV. For eligibility purposes, these payments may be counted as income in the month received. The payments are counted as a resource in the following month if they are kept.
If lump sum payments are disposed of before they are counted as resources, it could be treated as a transfer of assets without receiving fair market compensation. The CAO should try to determine whether regularly scheduled income amounts that the person received have been transferred. Sometimes a transfer takes the form of a transfer of the right to receive income.
For example, a private pension may be diverted to a trust and no longer paid to the individual. The CAO must verify the circumstances involving the disposal of a lump sum of income or the transfer of the right to receive income. The individual who disposed of or transferred the income must provide information such as:
Income levels in the past versus the present
The giving income to others
The CAO must impose a penalty period for individuals applying for or receiving LTC services when the CAO finds that income or the right to income was transferred on or after the look back date.
Recommended Reading: Guidelines To Qualify For Medicaid
National Appraisal Guides By Jd Power
J.D. Power is another top resource for determining the value of your car. The National Appraisal Guides provided by J.D. Power include valuable attributes such as an AutoCheck Vehicle History Report, new/used car searches and overall buying/selling resources. The AutoCheck feature is powered by Experian and uses the Vehicle Identification Number of each vehicle to check for prior damages and repairs.
Medicaids Asset Transfer Rules
In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.
This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
Example: If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months .
Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.
Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months .
The penalty period created by a transfer within the look-back period does not begin until the person making the transfer has moved to a nursing home, he has spent down to the asset limit for Medicaid eligibility, has applied for Medicaid coverage, and has been approved for coverage but for the transfer.
When The Penalty Starts
Any penalty arising from gifts during the look-back period begins to run when the applicant would otherwise be eligible for benefits if not for the gifts.
Example: Harry signed over a vacation cabin worth $40,000 to his daughter four years before applying for Medicaid. On January 31, 2022, he made a payment of $11,000 to the nursing home and was left with $1,000 in his checking account .
Harry will be ineligible for Medicaid benefits for a period of almost three months . His ineligibility period starts to run February 1, the date he would have been eligible for benefits, if not for having made a gift.
Be Fair In Your Pricing
Thanks to the nature of FMV, you are allowed a little variability when determining the value of an asset or item. Please dont stray too far from the fair market value or lie about it. If you do, you will be considered a fraud and may face legal actions.
Check out other sellers and online resources for comparable items to decide the most objective amount. Average the price of some similar items, which should help you find a reasonable FMV that you can apply to your transactions.
We urge you to be as honest and impartial as possible when deciding the fair market value of cars. If you have some form of doubt, we suggest consulting with a certified financial attorney or advisor who specializes in dealing with your particular situation. A few specific assets can be taken to professional appraisers to remove personal subjectivity from the process.
Also Check: Child Counselors That Accept Medicaid
This Article Covers The Concept Of Fair Market Value As It Relates To The Healthcare Industry As Well As Why And When It Is Necessary
Healthcare transactions and agreements between parties, such as one between a healthcare provider and a non-profit organization or third-party person/business, has to be consistent with FMV. Transactions and agreements determined to be inconsistent with FMV may come to bear civil or possibly criminal penalties.
In the United States, the healthcare industry is highly regulated. Terms associated with non-compliance include anti-trust, excess benefits, false claims, and fraud and abuse, among other terms. These terms all imply that a healthcare transaction or agreement is not in compliance or consistent with Fair Market Value. As a result, both civil and criminal penalties may ensue.
Gifts Made During The Look
While the Department of Human Services publishes the penalty divisor in terms of both days and months, the regulations state that the period of ineligibility is determined by dividing total gifts by the daily penalty divisor. Partial days of ineligibility are rounded down.
For example, the penalty in 2022 for a $20,000 gift would be calculated as follows: $20,000 ÷ $482.50 = 41.45, rounded down to 41. The period of ineligibility is therefore 41 days.
The rationale for this rule is that if the applicant hadnt given away, say, $44,000 of her assets, then she would have been able to pay for approximately three months of care at a rate of $14,676.04 per month. So the penalty will be the three months she could have paid for herself, if not for the gift.
Recommended Reading: How Much Can You Make To Apply For Medicaid
Making Comparisons With Other Fmvs
- FMVs are different when it comes to trade-in value. Internal Revenue Service says that an FMV approximates the sales number that a buyer and private seller would agree to for a vehicle. On the other hand, a trade-in value is what a dealership would ask for. You also have to consider that an FMV is measured based on potential sellers/buyers .
- Trade-in values of secondhand cars are often changed by dealers to increase car sales. The results are much more consistent with an FMV.
- Provide useful comparison information if you are unsure of the exact data. If you are helping someone else get an estimate or analyzing an older car, it is likely unlikely that you have every detail the website asks for. In that case, enter a series of years to create an available value range.
- Suppose you know that the vehicle was manufactured in the early 90s. Enter in 1991, 1992, 1993, and 1994. The values will differ with every passing year.
- Judge your vehicle against others presently for sale. Make sure to check your local newspapers automobile listings. Or, visit a used auto seller, enter the zip code and check similar vehicles in that area. Your asking price has to be identical to the ones in the neighborhood.
- Suppose you want to sell a 1998 Mustang. Check the local paper for other listings. The actual number may be slightly higher than the vehicles FMV, but it should be significantly closer.
Top Online Resources To Determine The Value Of Your Vehicle Fast
The Kelley Blue Book is one of the most trusted resources for determining the value of a vehicle industry-wide. The print version of the KBB has been in service for nearly one-hundred years . The KBB website provides the same information and more online, however. One of the top attributes of KBB online services is a free, five-year cost to own calculator. Taking advantage of the features offered by this convenient calculator helps you determine how much your car is worth on the open market up-to five years after its original purchase date. Entering your cars information is simple to do, although it is also helpful to understand what factors are used to approximate its current resale value.
Recommended Reading: Is Nebraska Total Care Medicaid
Calculating Your Cars Fmv
Funeral And Burial Funds
Generally, Medicaid considers the value of any non-refundable pre-paid funeral plan or burial contract exempt. This includes irrevocable funeral trusts in most states. IFT limits vary, but the cap is typically $15,000 or less per spouse. For example, Nebraska sets a max value of $5,372, whereas New York and Michigan are the only two states that do not consider IFTs of any value exempt for Medicaid purposes. Some states also allow applicants to set aside up to $1,500 in an irrevocable pre-need funeral arrangement and/or a revocable burial fund that is considered an exempt asset.
Recommended Reading: Can I Get Dental Insurance With Medicaid
Measuring Your Cars Fmv
- Visit Kelley Blue Book or Edmunds. On the main page of these sites, check for an icon or a tab that mentions Price My Car. Clicking on this tab will redirect you to a form that you must fill out. The website will use the information provided to provide a market value estimate for the vehicle.
- For the most part, these sites offer free estimates. However, additional fees may be thrown into the mix when you wish to list your car for sale on their platform.
- Enter the exact model and year for your vehicle. Head to the used car section after leaving the main website, and one of the first bits of information you will have to enter is the date of creation. Provide the date of production for the model and type of the vehicle. You can find this on the owners manual, or it can appear on the interior of the drivers door.
- If you arent sure about the year, try entering a date range. If you are unsure of the model, check similar vehicles on the Internet until you find one identical to yours.
- Supply your vehicles mileage. For this, check the odometer, and you will see some numbers there. You may have to turn on the engine to see this on newer vehicles. Enter these digits where they are needed on the FMV website. As a rule of thumb, cars with lesser miles are generally worth more than those with more.
Description Of Disposition Of An Asset
The disposition of an asset occurs when there is a transfer of ownership of, or interest in, a property. This may affect the individual’s eligibility for payment of LTC services. Disposing of an excluded or countable asset includes, but is not limited to:
Spending liquid or converting non-liquid assets to pay medical expenses.
NOTE: If an asset is used to pay medical expenses during the requested date of MA coverage or continuing eligibility period , the CAO will treat the asset as if it never existed.
Selling, exchanging or transferring the ownership title to real or personal property.
Selling real or personal property.
Spending resources to buy items for the benefit of the individual or spouse.
Unidentified deposits on financial statements.
Unidentified withdrawals from bank accounts.
Tax assessor online pages showing change in ownership of property.
Exchanging the asset for other property.
Receiving cash from disposing of an excluded or countable resource and disposing of the cash.
Purchasing life estate interest.
Receiving promissory notes and mortgages in exchange for cash or property.
Making formal and informal loans to others.
Establishing a trust.
NOTE: As a condition of eligibility, the individual must report and give proof of all trusts that are or will be established with the individual as a beneficiary. This includes Special Needs Trusts.
Also Check: Medicaid And Other Health Insurance
Fair Market Value Of Car: Kelley Blue Book
Kelley Blue Book is a trusted online guide that can give you an obvious idea about cars current fair market value. Its working principle is based on performing extensive market research and monitoring car sales trends across different markets. Moreover, it considers aspects like the present economic state, vehicle sales trends, and many more.
KBB comes up with a number that is both location-specific and accurate.
Using The Kelly Blue Book Five
The Five-Year Cost to Own assessment includes multiple factors about your vehicle. The cost to fill up your car with fuel based on a 15,000-mile annual average is included in the calculations. How much does it cost to keep your car in good, running condition? Expected maintenance expenses are also calculated. Repairs as applicable to a no-deductible extended warranty and remaining financing commitments are also tabulated.
Each U.S. state charges its own fees for tags, registration, and sales tax. Every car has also experienced some degree of value depreciation since it was purchased new off the lot. Depreciation and state-applicable fees are also included in the overall calculation of your cars fair market value.
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What Does Medicaid Consider Fair Market Value
Father-in-law is wanting to give the land of the family farm to my husband as he has not been able to farm it for some time, so my husband has been doing the work and letting his father keep the income to live on. I’m worried that he may need long term care in the future as dementia does seem to run in their family and that this could come back to haunt us. The tax assessed value is way lower than what it could be sold for. We could definitely come up with the money to pay the tax assessed value if we need to, but not the full amount that the farm could sell for. Does anyone know if Medicaid considers fair market value off the tax assessor rolls or do they go by comps of what land has sold for in the area?