People who take care of their elderly parents at home, can avoid the dreaded Medicaid five-year “look-back” rule on asset transfers. As long as they jump through all the hoops created by Congress, the elderly parent can transfer his home to an adult caretaker child with no Medicaid penalty. In this way, Medicaid rewards children who delay nursing home care for parents.
Congress created an exception to the look-back rule for adult children who take care of their parents. This rule is called the Caregiver Child Exemption, or the Caretaker Child Exception.
What is the Caregiver Child Exemption?
An adult child who lives in the elderly parent’s main residence and takes care of that parent for at least two years immediately before that parent enters a nursing home can fall within the Caregiver Child Exemption. The child must provide care to the degree that makes it unnecessary for the senior to live in a nursing home who would otherwise have to do so during the two-year period. The adult caregiver must be a child born to or adopted by the senior parent. Siblings and grandchildren of the senior do not qualify.
What is the purpose of the Caregiver Child Exemption?
Nursing homes are expensive. Congress intended to compensate adult caregiver children for their services and encourage them to provide care at home, instead of a nursing home. If not for the care provided by the adult child, the house would be sold to pay for the senior parent’s care in a nursing home.
Why do people going into nursing homes transfer their assets?
Medicaid provides funds to pay for long-term care for individuals who cannot afford it. Most people going into nursing homes would prefer Medicaid pay their nursing home bills, instead of paying the bills out of their personal funds. They intend to preserve their assets for themselves and their family.
One way that people attempt to protect their assets is transfer them to a relative or Medicaid Asset Protection Trust to fall below Medicaid’s asset limits and then apply for Medicaid. To prevent this, Congress implemented Medicaid asset transfer rules when it enacted the Deficit Reduction Act of 2005.
What is the Medicaid “look-back” period?
Under the Medicaid asset transfer rules, the state will look at all assets the senior gave away or transferred to others for less than fair market value (FMV) during the five years prior to applying for Medicaid for long-term care services. These transfers can include gifts of cash, or transferring one’s house or other assets to another person without the recipient paying the amount a total stranger would pay for the asset (FMV). This five-year period is called the “look-back” period.
What can happen if a senior violates the Medicaid asset transfer rules?
If a senior transferred assets for less than FMV during the look back period, Medicaid will impose a penalty and deny Medicaid payments for long-term care to that senior during the penalty period which could be months or even years. The penalty period is based on the amount given away for less than FMV.
Check with a local elder law attorney about the laws in your state.
Elder Law Net, Inc. “Medicaid’s Gift to Children Who Help Parents Postpone Nursing Home Care.” (accessed July 5, 2017) https://www.elderlawanswers.com/medicaids-gift-to-children-who-help-parents-postpone-nursing-home-care-15117
Paying for Senior Care. “Caregiver Child Exemption: Transfer the Home to Children without Medicaid Penalty.” (accessed July 5, 2017) https://www.payingforseniorcare.com/medicaid/caregiver-child-exemption.html
Centers for Medicare & Medicaid Services. “Important Facts for State Policymakers Deficit Reduction Act.” (accessed July 5, 2017) https://www.cms.gov/Regulations-and-Guidance/Legislation/DeficitReductionAct/downloads/TOAbackgrounder.pdf
U.S. Government Printing Office. “Deficit Reduction Act of 2005.” (accessed July 5, 2017) https://www.gpo.gov/fdsys/pkg/PLAW-109publ171/html/PLAW-109publ171.htm