Transfers exempt from medicaid clawback
Tactic 1: exempt transfers
Exempt transfers are asset transfers that do not incur a penalty. Here we will go over general exemptions which apply to all transfers and cover other exemptions regarding residents transfers only.
Let’s begin with general assumptions. Transferring assets in the following manner will not disqualify you from Medicaid:
So long as you intend to receive fair market value, then the transfer is deemed legitimate and not a gift.
With the purpose being not to obtain Medicaid benefits
Asset transfer to the spouse, this is partly due to the fact that one spouse may only have so many assets in order for you to qualify for Medicaid and thus such transfers are of limited value.
Transfers to special-needs-trusts or minors:
Esso transfers to children under the age of 21 or children with permanent disabilities, judging on SSI criteria,
Transfers to trust for disabled people under 65
This list of exemptions applies solely to residents transfers. Beyond the above exemptions, if the residents transfer meets the following criteria then there is no ineligibility period:
If the home is given to a caregiver child
If the home was given to a sibling who owns a portion of the home and has lived in the home for at least one year prior to the applicant entering a nursing facility.
Estate recovery covered here, applies not only to your home but in the asset you own when you pass away. Recovery cannot extend to your home should you have transferred while alive so long as you follow the above criteria. Published this link for more information on how to protect your home from the federal government’s estate recovery program for Medicaid expenses.
Tactic 2 Home protection trust
The second option we often recommend for clients is that they did their home so it’s owned by a trust instead of being given directly to the child. Using a trust in such a manner allows your property to be protected from the long arm of the government. A second benefit is that because the child does not own it outright, creditors and others interested in the assets cannot seize it.
Trusts enable individuals to protect assets, such as their home, from being seized because of long-term care costs. They also avoid many of the downsides associated with giving the home directly to your children.
For example the trust can be structured to provide for you to be allowed to reside in the house for the remainder of your life, without ever being evicted or asked to pay rent. In this instance, for tax purposes, you own the home and can make the standard deductions and qualify for rebates. You may also claim the residential exclusion should the property be sold. And errors will still receive a stop up and tax basis should the property be sold after you pass, this should limit or avoid potential taxes.
The structure can ultimately serve to protect more than just your home. Other investments such as checking accounts stocks life insurance policies can be protected. Because protections are not limited to just her home, these trusts are given different names such as, a “family asset protection trust”, or and “your lockable income only trust”, or a “Medicaid trust.”
Who can be a trustee?
Anyone can be a trustee, but most often the person named is a child. Think of it as being similar to naming someone for an executor of a will or power of attorney. This is partly to ensure the trust does not pass before you. Also, keep in mind a trustee merely ensures your wishes are followed out, they don’t own the assets in question. You may replace a trustee at your discretion for any reason at any time.
Note, this trust is not a revocable trust. A revocable trust does not protect your assets in any manner and especially not from Medicaid. To know more about the differences follow this link here.
Tactic 3 life estate deeds
A life estate deed allows you to give the home to your children, while you are alive, but still retain a modicum of control. For example, to be able to live in the home and not have to pay rent.
Many states allow this structure to bypass the probate process entirely. That means the home passes onto your children without having to go through a lengthy court process. There are a number of available life estate deeds. These variations include but are not limited to irrevocable deeds which require the beneficiaries consent for changes, to revocable deeds which do not.
You may also list a trust on the deed in order to protect the asset from creditors, divorces or the chance your child passes away before you. Consider Irrevocable Medicaid Trust Forms.
A life estate deed can be considered a gift under certain circumstances. Thus bringing the asset within the purview of the Medicaid estate.