Q. My parents are quite elderly. Their main asset is the family farm worth about $500,000. I’m afraid they’ll need nursing home care soon. Can they give the farm to me and my siblings and then apply for Medicaid to pay for their care?
A. Medicaid payment for long-term care requires (1) need for the care; (2) less than $2,000 of countable assets at the beginning of each month; and (3) monthly income under $2,250 (for 2018).
It is important to note that your parents may qualify for Medicaid while still owning the farm. A person’s home, including all the land it sits on, is excluded from Medicaid’s $2,000 resource limit if at least one spouse resides there. It can be excluded even if it sits empty (or is rented out), as long as at least one of your parents intends to return home.
If still owned at death, though, the farm (and other assets your parents still own) will be considered available to satisfy the state’s Medicaid estate recovery claim. This claim extends to all assets owned by either spouse at death, except for property that the non-Medicaid spouse owned at the time of marriage or received as a gift or inheritance during the marriage.
With this in mind, some folks looked for ways to give away assets, so that they would not be counted toward the $2,000 limit when applying for Medicaid or, even if excluded when applying, would not be owned at death and so would not be subject to estate recovery. Congress then adopted laws to discourage such asset gifting.
A person is ineligible for Medicaid payment for long-term care if he has transferred assets for less than fair value at any time starting five years before applying. The period of restricted coverage (Medicaid pays for hospital and other non-long term care charges during the “penalty” period, just not for long-term care) starts when a person is otherwise eligible for Medicaid. The penalty lasts one day for every $258 (for 2018) transferred.
There are some exceptions, some of which might apply to your parents. Your parents may transfer their home property, without penalty, to a child who is disabled or to a child who has lived in the home and provided care to the parent for at least the two years leading up to Medicaid. There are other exceptions, but the basic rule penalizes gifting assets within five years of applying for long-term care Medicaid.
For those who face a gifting penalty, there is a hardship waiver. It must be requested within 10 days of the notice imposing a transfer penalty. A waiver brings full Medicaid coverage, but it also brings with it the state’s right to come after the recipient of the gift, to force its return.