One of the major rules of Medicaid eligibility is the penalty for transferring assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return. These restrictions, already severe, have been made even harsher by enactment of the DRA. Many people have heard that they can transfer $10,000 per year to a person without any penalty, but this is simply not true. They confuse an old gift tax rule which excludes transfers of what used to be $10,000, but which are now $12,000, per year without incurring a gift tax. While there is no gift tax consequense to an annual $12,000 transfer, there is most certainly a medicaid penalty for such a transfer made within 60 months of application for Medicaid.