Is Transferring Assets to Qualify for Medicaid Against the Law?

Is Transferring Assets to Qualify for Medicaid Against the Law?

You may have heard that transferring assets, or helping someone to transfer assets, to achieve Medicaid eligibility is a crime. Is this true? The short answer is, no.  For a brief period it was, and it’s possible, although unlikely under current law, that it will be in the future.

As part of a 1996 health care bill, Congress made it a crime to transfer assets for purposes of achieving Medicaid eligibility. Some called this the “Granny Goes To Jail Law.”  Congress repealed the law in 1997, but replaced it with a statute that made it a crime to advise or counsel someone for a fee regarding transferring assets for purposes of obtaining Medicaid. This meant that although transferring assets was again legal, explaining the law to clients could have been a criminal act.

In 1998, then-Attorney General Janet Reno determined that the law was unconstitutional because it violated the First Amendment protection of free speech, and she told Congress that the Justice Department would not enforce the law. Around the same time, a U.S. District Court judge in New York said that the law could not be enforced for the same reason. Accordingly, the law remains on the books, but it will not be enforced. Since it is possible that these rulings may change, you should contact your Elder Law attorney before filing a Medicaid application. This will enable the attorney to advise you about the current status of the law and to avoid criminal liability for the attorney or anyone else involved in your case.

We continue to legally counsel clients on all of the issues related to Medicaid qualification, asset protection and elder law planning generally.  It is our job to explain the law to you and to let you know the options that are available and the potential benefits and pitfalls associated with each.  We know that there are a lot of people out there who have worked long and hard to buy a home and save some money so that they can ultimately pass those assets to their children.  The last thing that they want is to lose these assets to nursing home spending.

There are great planning opportunities available to make sure that assets are secure during your lifetime and will ultimately transfer to your beneficiaries without being lost to the rising cost of long term nursing care.  It is always better to plan early in order to protect large portions of your estate, but even if you have done nothing and you are about to enter a nursing home, it is not too late.  There are even “crisis” planning options that can result in protecting one-half or more of your assets for your children.

Some of the most common planning considerations are:  Creation of a Medicaid Asset Protection Trust, use of a Medicaid Compliant Immediate Annuity, qualification of the Family Caregiver Exception, creation of the Caregiver Exception, Irrevocable Burial Reserve, Monthly Gifting Exception, Elder Law Friendly Financial Power of Attorney, Medical Power of Attorney, Living Will.

Check out our other great articles throughout this site that more specifically address the different ways to protect and preserve your assets.

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For assistance developing a comprehensive nursing home asset protection plan in Pennsylvania, please contact Douglas L. Kaune, Esquire at (610) 933-8069 or email him at Doug’s entire practice is focused on elder law, Medicaid application, estate planning, trust planning, estate administration and protection of clients’ assets from nursing home spending and estate and inheritance taxation. Unruh, Turner, Burke & Frees, P.C. is a full service law firm which has three convenient office locations in Phoenixville, West Chester and Paoli, Pennsylvania. The firm primarily services clients in Chester, Montgomery, Delaware, Philadelphia, Bucks and Berks Counties, but can represent clients throughout Pennsylvania.