If you are considering applying for Medi-Cal benefits, there are important eligibilty requirements that you must be aware of. One important eligibility issue is known as the “five-year look-back period.” This penalty period applies when an applicant is seeking long-term care benefits through Medi-Cal and makes asset transfers during that period. This article will explain a few ways our Orange County Medi-Cal planning attorneys can help you prove that your asset transfers are not subject to the penalty period.
Why Does Medi-Cal Examine Asset Transfers?
There are some people who realize they need long-term health care and, in order to protect their eligibility for Medi-Cal benefits, give away their assets to relatives to reduce their financial resources and qualify. Medi-Cal does not look favorably on these types of transactions because those assets could have been used to pay for the individual’s long-term care expenses. For this reason, applicants can be penalized for giving away their assets only for the purpose of avoiding losing them to Medi-Cal. This is one of the benefits of Orange County Medi-Cal planning.
What Does the Penalty Mean and When Does it Apply?
What this basically means is that you cannot move into a long-term care facility on Monday, transfer your assets to a relative on Tuesday, in order to qualify for Medi-Cal benefits on Wednesday. In order to discourage these transactions, the Medi-Cal agency will examine all asset transfers made within the last five years and exact a penalty for any assets made during that period of time. The length of the penalty period is calculated based on the value of transferred assets and which is divided by the average cost of long-term care in your state.
What Types of Property Transfers are Subject to the Penalty?
The federal law that created the penalty period is known as the Deficit Reduction Act. This law was passed in 2005 and it requires every state’s Medicaid agency to impose a period of ineligibility on anyone who gave away their assets within five years of their application for Medicaid. How Medicaid defines the term “asset transfer” is very broad, however. The definition does include gifts, charitable donations, the sale of any assets for less than fair market value, and forgiving a debt owed to you.
Not All Transfers are Fraudulent
The penalty may seem pretty unfair to individuals who innocently made gifts to loved ones with no intention or expectation that they would need to apply for Medi-Cal benefits in the future. It is not uncommon for clients to give money to an adult child to help them through financial difficulties and then unexpectedly become sick and need long-term care. If they need Medi-Cal to help pay for those nursing home costs, their asset transfers will be investigated, and a penalty period could be imposed.
How Can I Prove My Gifts were Not Fraudulent?
In order to avoid Medi-Cal’s penalty period, your Orange County Medi-Cal planning attorneys can help you to prove that legitimate transfers of assets were not fraudulent. The burden of proving that your asset transfers were made for reasons other than to qualify for Medi-Cal benefits is on the applicants. This burden can be difficult to meet, but there are four ways of proving your transfers were not fraudulent:
No. 1: You were in good health at the time the transfer was made. By establishing that you were not having health issues that would require long-term care at the time you made the transfer shows that you did not make the gift in anticipation of applying for Medi-Cal benefits.
No. 2: The transfer was part of a normal practice of giving. If you can establish a history of giving in the same way the assets at issue were given, then you can establish a lack of intent to defraud. In other words, if it is your usual practice to help your children or a particular charity and this was the same type of gift, then that practice can show a lack of intent to defraud.
No. 3: The transfer was only of a small portion of your total assets. You can demonstrate that, at the time the transfer was made, you had a substantial amount of remaining assets. This type of evidence will show that you were not attempting to give away all of your assets in anticipation of applying for Medi-Cal benefits.
No. 4: You made the transfers as part of an estate plan or based on financial advice. Another way to demonstrate a lack of intent to defraud the government and avoid using your assets to pay for long-term care is to show that your transfers were made on the advice of an attorney or accountant. If you can show that you were simply engaging in estate or financial planning, you may be able to establish a lack of intent to reduce your assets for purposes of Medi-Cal eligibility.
Download a FREE estate planning worksheet today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
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