QUESTION: How are gifts treated when a Nursing Home resident applies for Medicaid in Michigan?
More specifically, when a person who resides in a nursing home applies for Medicaid assistance in Michigan, what is classified as a gift and how are prior gifts treated?
Short Answer: A gift is treated as an improper transfer of assets that will cause a delay in receiving Medicaid benefits despite meeting all of the Medicaid eligibility requirements.
Explanation: First, let’s define a “gift” or in Medicaid terms, a “divestment”. A divestment is defined, with a few exceptions, as a transfer of an asset by a Medicaid applicant or spouse (or someone acting on behalf of the applicant or spouse) to someone else, within the last five years, for less than fair market value. A common example may be that the applicant gave his or her car to a family member for nothing in return. You should also know that selling the same car to the family member for less than the fair market value is also considered a divestment.
So what happens when a Medicaid applicant who resides in a nursing home is deemed to have “divested” assets? Essentially, once the applicant is deemed to have met all of the Medicaid eligibility requirements including spending down their assets to below the required amount, the Medicaid benefits will not begin until the divestment penalty period runs out. Unfortunately, the common outcome is that a person who has a divestment penalty period assessed will generally be forced to use other protected assets, such as the equity in their home, to cover the nursing home costs during this period.
Note: The above discussion is based off of information available as of January 2018 and is subject to change at any time. Oftentimes engaging an experienced elder law attorney will provide the Medicaid applicant and his or her family with the expertise needed to ensure all proper actions are taken before and after applying for Medicaid and that the Applicant and family properly comply with the Federal and State laws and regulations.
Please note that above question assumes Michigan law, rules, and regulations apply. Also note that the above question is intended for education and informational purposes only and not intended as legal advice. Every situation is vastly different and thus the need for one-on-one legal advice from an experienced attorney. Every reader of this article is encouraged to seek out an experienced attorney to advise on their specific circumstances.