Little-Known Medicaid Rule Allows Some Nursing Home Residents to Protect 100% of Assets

Medicaid, a joint federal and state program, assists those requiring long-term care in nursing homes. In order to qualify for Medicaid to help pay for long-term care, one must meet strict financial eligibility requirements.  Clients often ask if they can just “give away” assets to friends or family to qualify for Medicaid.  Typically, any significant transfer of assets made within five years of a Medicaid application will result in penalties.  In Indiana, a one-month penalty is imposed for each $7,635 (effective 7/1/2024; this figure changes on July 1 of each year) that has been gifted over the previous five-year period before applying for Medicaid.  Medicaid will not pay for the nursing home during the penalty period.  For instance, if an individual gave away $76,350 within the five-year period leading up to the Medicaid application, then there would be a 10-month penalty period ($76,350 divided by $7,635), during which Medicaid would not pay for nursing home care.

However, Indiana has specific provisions that protect families of disabled children, including disabled adult children. Under these provisions, transfers made to a disabled child, or to a trust established for their benefit, are exempt from the usual Medicaid penalty rules.

This exemption is crucial for families who wish to ensure that their disabled children are financially secure without jeopardizing Medicaid eligibility for other family members needing nursing home care. For instance, if parents transfer a portion, or all, of their assets directly to, or to a trust for their disabled child, these assets are not counted against them during the Medicaid application process. This provision allows parents to plan for their disabled child’s future while still preserving their own eligibility for Medicaid to help pay for long-term care.  To qualify for this exemption, the disabled child must meet the Social Security Administration’s definition of disability. 

Families considering this approach should seek guidance from an experienced elder law attorney to ensure compliance with all relevant laws and regulations. Consideration should also be made to ensure that the disabled child’s benefits are not negatively affected by such planning.  I have an asset protection team that focuses on helping clients qualify for Medicaid while protecting assets to the fullest extent of the law.  Contact our office at 812–423-1500 to schedule a free consultation to discuss your case.