Article by: Douglas L. Kaune, Esq. 610 933 8069
Typically, gifts made by someone during the 5 years prior to applying for Medicaid in Pennsylvania (PA) will cause him or her to be ineligible to receive such benefit to pay for either nursing home or at home care. This 5 year Medicaid ineligibility period must be diligently monitored during the typical elder law planning process. That being said, there are a number of exceptions to the broad 5 year ineligibility rules. In this article we will review the legal exception allowing a parent to transfer assets to his or her disabled child without penalty.Under Federal Law, 42 U.S.C. § 1396p(c)(2)(B)(iii) the person making a gift, during the 5 years prior to applying for Medical Assistance (MA), to or into a trust for the benefit of a blind or disabled child will not be ineligible for Medicaid. Where applicable, this exception provides a great planning opportunity to protect assets where they would otherwise be lost to the cost of long term nursing care.
The initial issue for many with disable children is awareness of this exception. An applicant for Medicaid must be aware of this and other exceptions as it is not the Pennsylvania Department of Welfare’s obligation to make him or her aware of the planning options and exceptions. It is very important for the applicant to be fully informed of his or her rights and the opportunities he or she might have to protect assets from nursing home spending. We want to avoid a scenario whereby a person with a disabled child could enter a nursing home, spend all of his or assets only to find out later that everything could have been protected. Knowing the law can result in hundreds of thousands of dollars of savings.
A second consideration is the form of gift made to the disabled child. It is almost always appropriate to make a gift for a disabled child to a Special Needs or Supplemental Needs Trust. You can read this article on Special Needs Trusts to more fully understand the rationale for using this type of trust rather than making an outright gift. Suffice it to say, an outright gift to a disabled beneficiary might disqualify him or her from government benefits such as social security disability (SSDI) or Medicaid.
Earlier this year (May 2011), the Pennsylvania Department of Public Welfare (DPW) provided additional guidance to caseworkers throughout the State for the disabled child exception to the 5 year ineligibility rule.
- · The policy statement confirmed that assets composed of both income and resources may be transferred without penalty to an individual’s disabled child. The disability must be consistent with Social Security (SS) standards and must be documented.
- · It was confirmed that there is no age limitation for who can receive the gift. The individual’s disabled child can be an adult or a minor.
Read this earlier article detailing gifting to special needs trusts for disabled children in order to protect family assets and qualify for Medicaid.
This additional guidance provides us with security that the disabled child transfer exception is available in Pennsylvania (PA) and what steps we need to take to make sure clients and their children fully qualify. Please contact Douglas L. Kaune at 610 933 8069 or dkaune@utbf.com to review the disabled child exception and other Elder Law or Estate Planning considerations.
