On Feb. 8, 2006, new laws were enacted which affect folks who transfer assets without receiving adequate compensation, and then apply for Medical Assistance (MA) to help pay for nursing home or other long term care (LTC) services. One aspect of change in this new law applies to when the penalty period for an uncompensated transfer will start. An uncompensated transfer is defined as: the giver not receiving fair market value for what was gifted or sold.
Examples of an uncompensated transfer include:
- Putting your son or daughter's name on the deed of your property without the son or daughter paying fair market value for their ownership.
- Giving away cash as a gift. The state of Minnesota considers gifting as a way to gain or maintain eligibility for MA; therefore, it is up to the MA applicant or enrollee to provide evidence that the gift was not made for those purposes.
How is penalty determined?
If a person gifts assets and the county determines it was an uncompensated transfer, the county will determine the length of a penalty period whereby MA will not pay for nursing home or LTC services. The penalty period is calculated based on the value of the improper transfer, and the state's average cost of a month of nursing home care, which changes yearly. For improper transfers done prior to Feb. 8, 2006, the penalty period will start the month after the improper transfer occurred. In the past, folks looking to protect assets, gifted assets and waited out the penalty period before applying for MA/LTC. With the new law now in effect, for MA/LTC applications received by the county on or after July 1, 2006, the penalty period start date will begin when the applicant applies for MA/LTC and is otherwise eligible for MA/LTC. This means there is no period to wait out the penalty period like there had been in the past. The current lookback period for uncompensated transfers is 36 months. In 2009, the lookback period will increase by one month each month until the lookback period is 60 months.
What does this all mean?
For example, under the old rules, if someone gifted $10,000 on Jan. 5, 2005, there would be 2.38 months of penalty ($10,000 divided by 2005 State avg cost of NH = 2.38) whereby the penalty would start February 2005 and continue through March 2005 and be a partial (.38) penalty for April. A person could apply in May 2005 and the penalty period would be over. Under the new rules, if someone gifted $10,000 on March 1, 2006, and applied for MA/LTC on July 1, 2006 ( or later) the penalty period would now be 2.25 months ($10,000 divided by 2006 State avg cost of NH = 2.25) starting the month MA/LTC is requested and the MA/LTC applicant is otherwise eligible, which would most likely be July 2006. The penalty period would now run July 2006, August 2006, and a partial (.25) penalty for September 2006. If a person gifted assets in the past, then applies for MA/LTC and has a penalty period so that MA will not pay for LTC services, the applicant can request an undue hardship waiver asking the county to waive the penalty period created by the past gifting. If the county grants the waiver, then the matter is turned over to the county attorney's office to pursue getting the asset/gift/land back from the person(s) who received the asset/gift/land.
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The gifting provisions that were allowable in the past have stopped. It is very important for families to understand the implications of transferring assets or gifting assets to others. It may be helpful to talk to an attorney who is skilled in current elder law. Each year there is the potential that laws relating to MA eligibility will change, so it is wise to know what the current policy is regarding transferring assets.
If you have questions, call 879-4583 and ask for the long term care screener or Patti Hart, supervisor, Elderly & Disabled Unit.
