Disabled Child of Not? Timing is Everything (Part 2)
Last week I was telling you about Rick. His Dad transferred his home to Rick, who currently is disabled but was not at the time of the transfer. I explained to Rick that the transfer, contrary to what he believed, is subject to a Medicaid transfer penalty of 51.5 months if Dad applies for Medicaid now. I had an idea of how we could fix it.
But, before I shared that with him I asked Rick a few more questions. “Who has been paying the taxes and upkeep on the home?”, I inquired. Rick told me that until he moved into the home a year ago, Dad was paying all those expenses. He transferred money to Rick who then paid those expenses out of his own checking account.
Again, I told Rick that up until the point in time that he was deemed disabled by Social Security, those transfers would be subject to a Medicaid transfer penalty. So, adding those amounts to the $400,000 home transfer would increase the penalty further.
Rick was really panicking now. I told him to hold on. I had a solution. “What we need to do is have you transfer these assets back to Dad now, including the home. We could then have Dad transfer the assets right back to you”, I told him.
I know you are reading this and saying to yourself, “that can’t be right”. However, the transfer back to Dad will undo the potential transfer penalty. And then the new transfers from Dad to Rick will fall within the disabled individual exception. It is critical that this all be done, however, before filing a Medicaid application.
Rick was confused and amazed at the same time. He understood what I was saying although it seemed crazy to him. But, that’s how the Medicaid rules are, complex and bizarre at times. Had Rick not called us when he did to hire us to handle Dad’s Medicaid application, he would, in all likelihood, have been faced with a lengthy penalty with no idea of how to fix it. And because it can take 4 to 6 months after the initial interview before the State actually reviews your application, Rick would not have learned of his mistake until he ran up tens of thousands of dollars of nursing home bills.
No one wants to be in that type of a mess. Rick was lucky he got the right advice at the right moment from someone who knows the complexities of the Medicaid rules. As they say, timing is everything.