Ronald Morton's Elder Law Blog

The Myth of the $10,000 Transfer

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. 

Godfather of Soul may have Disinherited Son

James Brown, the "Godfather of Soul" apparently last updated his estate plan in prior to giving birth to his now five year old son, James Brown, Jr.  The will failed to provide for the child or the child's mother, Brown's long-term companion, CNN reports.   A dispute over Brown's estate is almost a given under these circumstances.  Brown's estate illustrates the importance of frequent review and updates of estate plans whenever changes occur. 

Spousal Impoverishment and Increasing the Minimum Monthly Needs Allowance

Qualification Basics

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $4,000 in "countable" assets. The spouse of a nursing home resident — called the 'community spouse' — is limited to assets up to $99,540 (in 2006) in "countable" assets.  This figure changes each year to reflect inflation, and the 2007 figure has not yet been published. 

All assets are counted against these limits unless the assets fall within the short list of "noncountable" assets. These include:

1. personal possessions, such as clothing, furniture, and jewelry;
2. one motor vehicle;
3. the applicant's principal residence, together with all adjoining real estate, up to $500,000 equity;
4. prepaid funeral plans and a small amount of life insurance; and
5. Assets that are considered "inaccessible" for one reason or another.