Aging Answers – Episode 3: The Myths and Truths of Medicaid Transcript

Episode 3: The Myths and Truths of Medicaid Transcript

Transcript: Shana Siegel, Michelle Scanlon

Welcome to Norris McLaughlin’s Aging Answers, a limited podcast series discussing the key topics of elder law planning and long-term care. I’m your host, Shana Siegel, Practice Group, leader of the Elder Law Group, and member at Norris McLaughlin. In this episode, I’m joined by my colleague associate Michelle Scanlon, to talk about the myths and truths of Medicaid. How you doing Michelle?

I’m good. How are you, Shana?

Great. So, let’s talk about Medicaid. There’s a lot of, misinformation about gifting. Some clients come to me and say they think they could never get Medicaid if they gave gifts. Others think it’s okay to give up to the annual gifting limit. Can you set us straight?

Yeah. So the first key kind of thing to understand is the five-year look back. So, the period of time in which Medicaid really cares about is five years from the date of eligibility back. So, 60 months back, and we’re really looking for what’s gone on and what’s transpired during that period, and we’re just trying to understand what has happened, what it was for, and where the money was going. So, it doesn’t mean just because somebody’s transferred something that Medicaid’s gonna be denied, but rather that certain types of transfers can result in a penalty period based on the time of the gift and the size of the gift. So, for example, if somebody was to transfer a large sum of money that might flag something for Medicaid’s purposes, but with proper planning and developing strategy, we can minimize the impact of this type of situation. So, there are certain like penalties that are associated to specific types of transfers, but not all transfers are gonna make somebody ineligible.

So, let’s talk back and forth about some exceptions to the penalty rule. Do you wanna, start off, you wanna give one and then we can kind of talk them through?

Sure, so the first one is transfers between spouses. So, if you have an individual account and say husband’s name and then, another account in wife’s name, any transfers, going back and forth between those accounts wouldn’t be something that would cause a penalty. So, a lot of people will come to us and ask questions. Well, you know, we keep our bank accounts separate. You know, I was gifting money this way. Any transfers back and forth between the spouse would be something that would be deemed an exception to the penalty rule.

Right, but the downside of that is that a spouse’s money is available. Right.


A lot of people think if they got an inheritance or if they kept their money separate that it’s safe, but it’s not really safe.

Exactly. There’s more planning that would go into that.

So, another common exception is the caregiver-child. So, I’ll just kind of give a little bit of a summary of that. So that’s an exception where you would have a child who moves into the house of the parent and they’re providing care for that parent for a period of time, and it must be at least two years. Prior to then applying for Medicaid, and you have to be giving a certain level of care. So, it’s not like just you move in and you’re helping out with like the shopping and the cooking. They really have to be a hands-on caregiver providing the level of service that the individual that otherwise they would have to be in a nursing home. So this is one where you really, you know, it’s a great exception because you could transfer your house then to the caregiver-child. But, you have to really make sure that you’re working with an attorney to make sure that you document that you do qualify for it. Because Medicaid loves to go after it, don’t they?

They definitely do.

All right. So, do you wanna talk to us about transferring to an individual with a disability?

Yeah. So, if you have a loved one who has been deemed disabled, there’s also an exception to some of the penalty rules, which would allow you to transfer directly to that individual. So sometimes this can be useful in terms of a home or assets. But we also have to keep in mind like when you have a loved one with a disability, that they also may have their own benefit eligibility requirements. So again, this is one of those exceptions here, but we wanna make sure that you’re consulting an attorney as you approach this kind of topic. Because in some situations you may be helping out your current Medicaid application but may be hurting or harming your loved one at the same time. So again, it’s a useful tool, but we should make sure that we’re working together with an attorney and the family to make sure it’s used appropriately.

And there are trust that we got can use for this purpose too. So you might be, you know, transferring to the individual through a trust and that can be really useful. You know, I find that this one is terrific because I had a case recently where the Medicaid applicant had three children, one of which she was, you know, had been living with her for years and years and she was really able to transfer quite substantial, not only just a home but a quite a substantial amount of money to the child with a disability, which is great because then that allowed her to, you know, kind of continue to make sure that for care for exactly. Another exception is when you have an individual who’s under age 65, and they need Medicaid, and they could actually transfer their own assets to a special type of trust, a special needs trust, that’s only available for individuals under age 65. But that’s a really great opportunity to be able to make sure, because you know, if you’re younger and you’re going onto Medicaid, there may be substantial things that you may need. Whether it’s you know, a wheelchair or you know, whatever things, a computer, whatever things that you might need that you would be able to use the trust for.

Yeah, to supplement your care and, you know, be able to have different added things that you normally wouldn’t be able to do on a typical Medicaid application. So, it’s definitely a really useful tool.

And one of the nice things is that, you know, you don’t necessarily have to have made these transfers thinking, having these things thought ahead of time, right? So, you know, you may have given to one child and you didn’t know that there was, you know, this disability, but it’s those particular transfers wouldn’t be subject to the penalty. Whereas you know, maybe another transfer to another child would be subject to a penalty, but that then would allow us to bring the penalty down in general. And, you know, as I said, we can do some planning for them.

Yeah, I think one of the things, you know, going back to misinformation on gifting and stuff is, you know, that annual gifting limit the IRS sets every year and people automatically think, okay, well it says I can gift $16,000 to an individual. That means they could do it as they’re planning for Medicaid too. So, you know, those types of things. Just having people get the right information out there, knowing that that’s not always the case. However, maybe if they fit one of these exceptions that we talked about, that would be a different story. It’s always helpful to kind of have a consultation and just understand what you’ve done maybe and, how you can fix it. Cause there’s definitely tools that we can utilize to maybe correct certain situations or plan for the future.

Exactly. So why don’t you give us just, an overview of what kind of resources can you have in applying for Medicaid?

Yeah. So, you can have a car, an individual can have a vehicle. The home is an exempt asset. You can do a funeral trust. That’s one really good tool that I think that a lot of people miss out on is pre-planning the funeral, making sure that they’ve set up, you know, everything organized and then it’s, deemed a noncountable asset for the Medicaid application. You know, doing those types of things and really helps again with the spend down and also, it’s not something that Medicaid’s gonna penalize you for.

So, there’s also certain spousal protections we talked about before, how you have both spouses’ assets are considered available, but that doesn’t mean that both spouses have to be spent down to the $2,000 level. So, what happens is that you have a situation where you look at the total assets that the couple has is the time of application and then you, the individual is allowed to keep, the spouse is allowed to keep an amount up to one-half of the total assets, but there’s a cap on it, unfortunately, a pretty low cap. So, it’s $148,620 is the cap, and then the Medicaid applicant is allowed to have $2000. So together it’s just over $150,000. So that’s pretty much other than the house, what the spouse is allowed to have, however, we can amplify that using, the income rules. So, do you wanna talk about the income rules a little bit?


How we can use that?

So, sometimes like, again, going back to the, our kind of theme here, misinformation about Medicaid is, People assume that if you make too much income that you won’t qualify for Medicaid. But, you know, we’ve utilized the Qualified Income Trust here in New Jersey to allow people who have a higher income to still qualify for Medicaid. The income limit now it recently was raised to $2,742, so that one allows us to get somebody qualified on Medicaid that maybe has a higher income. And then we also have a community spousal allowance, which allows us to retain some of the spouse’s income for the non-Medicaid applicant.

In addition to that, if we had a spouse who, you know, let’s say that the couple together had like $500,000, we might be able to convert some of that asset into income. So because a spouse’s income is never, required to be considered for Medicaid purposes, we can bump up that spousal income, and we do that by converting an asset into an income stream through the use of a qualified annuity. So that’s a really great option for people who, you know, maybe they’ve got a couple hundred thousand dollars over and whether that’s an IRA or some other, investment asset, we could be able to do a particular type of Medicaid, annuity that would allow us to have more income coming to the spouse. And that way they’re able to take that extra, you know, $300,000 or whatever it is over the $150,000 and be able to retain that. They’re just gonna get it in income over time. I wanted to talk about some of the different rules in different states, cause I know people come to me all the time and they say, oh, the Ira. You know, oh, well, you know, yeah, the spouse has money, but it’s in the IRA and that’s excluded. Or you know, they raise other things about the spouse not having to contribute. So, do you wanna talk a little bit about New York and Pennsylvania?

Yeah, so New York treats things a little bit differently than New Jersey, as Shana kind of implied the IRA as a noncountable asset in New York. Where in New Jersey, it’s definitely something taken into consideration and then has to be spent down. So, I’d say that’s the biggest difference. Then also in New York, they have a much greater home care program than the state of New Jersey does. We have it at home, but nowhere near the level that New York does. On the opposite side, though, New Jersey does have a much better-assisted living program. So again, as Shana implied, there’s little nuances through each state, so it’s very important to kind of understand where you’re at, what differences are gonna affect you, and if maybe you’re on one of those border towns, considering not only meeting with somebody who understands New Jersey laws, but also New York so that you can kind of figure out which state maybe is gonna be more appropriate depending on where your loved one is gonna end up as well.

Yeah, for our Pennsylvania clients.

Oh, Pennsylvania too, yeah.

It’s the IRA, is also excluded in that situation. So, it’s similar to New York in that way. Okay, so I you know, I think we get a good sense that, you know, it’s really important to talk to an attorney who knows the different rules, how they apply in your particular jurisdiction, understanding how you might be able to, if you have done some gifting, to be able to cure it. If you are considering gifting, that might be possible even within the five years. It just really, it. Fact specific and as a result, it’s really good to, you know, have a consultation with somebody who can guide you in this cause you don’t wanna get it wrong. That’s definitely the case.

And, and on that too, like maybe you didn’t even realize what your parents had been doing in the past too. So just getting a full understanding of what happened in that window is extremely beneficial as well too. And then have that consultation to see what options are there to cure and fix those kinds of situations.

Great. Thank you so much, Michelle.

Thank you.

This has been Norris McLaughlin’s Aging Answers a limited podcast series discussing the important topics revolving around elder law planning and long-term care. I wanna thank my colleague Michelle, and you, the listener, for being a part of the conversation. Be sure to tune in next time for a brand-new episode. If you’d like to learn more about our work, please visit our blog page, Norris McLaughlin’s, peace of Mind, or email us at

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