What are Medicaid Transfer Penalties?


Medicaid can be a complicated system, and you may benefit from speaking with an elder law attorney who can help clear up any confusion you might have. It’s normal to want to complete all the Medicaid enrollment paperwork yourself, however, in order to avoid a Medicaid transfer penalty, we recommend speaking with an attorney who specializes in elder law.

To understand what a Medicaid transfer penalty is, let’s go back a few steps. In order to be eligible for Medicaid, you cannot have recently transferred assets, because the government wants to prevent seniors from simply giving away all their assets to family and friends, then enrolling in long-term care paid for by Medicaid. 

When a new application is submitted, Medicaid’s system reviews the applicant’s past financial information within a specific frame of time, known as the look-back period. Each state has slightly varying look-back periods, and in New Jersey it’s five years, meaning all the applicant’s financial information dating back five years will be thoroughly examined. 

What exactly are they looking for? They’re looking for any gifts the applicant gave, or any assets the applicant transferred, for less than what is called fair market value. If any assets or money changed hands for less than the fair market value during the five-year look-back period, the applicant will be ineligible for Medicaid for a certain period of time, known as the penalty period.

For example, if you give your adult daughter a car worth $100,000 and in return your daughter pays you $200, Medicaid will delay covering the cost of any of your expenses, because if you had received a fair market value price for the car you could have used that money to pay for your care instead of enrolling in Medicaid. The delay in covering your care is the Medicaid transfer penalty, and the length of the penalty period depends on the total amount of assets transferred and gifts given. 

Incurring a Medicaid transfer penalty means you are responsible for the full cost of your care until the delay is over. For seniors on a budget this can be difficult and stressful, especially those with more complex medical needs.

Advice from New Jersey elder law attorneys 

The Medicaid transfer penalty system does have exceptions and exemptions, and if you’re unsure about how it works, we are happy to talk through your specific situation step by step. We are proud to be trusted attorneys in many areas of elder law, including healthcare proxy, power of attorney, medical directive, and Medicaid, so please contact us today and let us know how we can help. 

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