| Medicaid Planning: General Info FAQ Glossary Questions to ask yourself |
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FAQ |
Our firm has handled over 3,500 medical Planning Files. |
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If
a person is going to transfer assets, do they need to do it more than
three (3) years prior to entering a nursing home? No.
The three (3) years is simply a lookback. If transfers occurred prior to the three (3) years lookback,
there is no penalty. If
transfers occurred during the three (3) year lookback, there is a penalty. In most instances, the penalty is significantly shorter than
three (3) years. Is
it too late to do Medicaid Planning if someone is already in a nursing
home? No.
Medicaid Planning can be done even after someone has already
entered a nursing home. Under
Medicaid is it alright to transfer $11,000 to each family member every
year? No. The $11,000 per year gifting limit is part of the gift tax law, not the
Medicaid law. Medicaid does
not permit any transfers within a lookback period without them being
subject to penalty. On the
other hand, if gifts made for Medicaid purposes exceed $11,000 per person,
per year, this does not necessarily trigger payment of a gift tax.
It simply means that a gift tax return will have to be filed.
Beginning in January 2002, a person can gift $1,000,000 during his
lifetime or on death in addition to the $11,000 per person per year
without paying any tax. Does
the person receiving the gift for Medicaid Planning purposes have to
pay income taxes on the gift? No.
A gift is not taxable income.
The person receiving does not declare the gift on their 1040.
However, if the person receiving the gift invests the gift, they
must report the investment income from the gift on their 1040. Are
there any income tax issues to be considered in Medicaid Planning? Yes. If a person withdraws money from an IRA, it is taxable
income. If a person liquidates E or EE Bonds, it is taxable income. If a
person liquidates H Bonds, which have been converted from E or EE Bonds,
it generates taxable income. If
a person withdraws money from an annuity, a portion of the withdrawal is
taxable income. If a person
assigns an annuity, it triggers immediate income tax on the deferred
income. These are a few of
the many examples of events which trigger income tax.
Carryover basis, step up in basis and tax on sale of home are some
of the others. Good Medicaid
Planning incorporates good tax planning. Can
trusts be used for Medicaid asset transfer purposes? Yes. The Federal Government has approved the use of certain types
of trusts for Medicaid Planning purposes. Is
it true that a home is not counted for Medicaid eligibility purposes? In some cases, a home is not counted as an asset for Medicaid
eligibility purposes.
However, the home must always be considered in Medicaid Planning.
Even if it is not counted as an asset for Medicaid eligibility
purposes,
New Jersey will file a lien on the home upon the Medicaid applicant's
death. Is there a way I can transfer my home to my children but insure
that I can live
there for the rest of my life? Yes. There is a technique known as a life estate.
Under a life estate, the parent
transfers a remainder interest in the home to the children but reserves
the right to live there for the rest of the parent's life.
The children cannot
sell the home out from under the parent or mortgage it without the
parent's
consent.
Is an annuity a good Medicaid Planning technique? Under current New Jersey law,
purchasing an annuity may be treated as a
transfer of assets
or subject to estate recovery. Therefore,
it is not a good Medicaid Planning
technique.
Is it important to address legal planning documents in Medicaid
Planning? Yes. It is always important to review Wills, Living Wills and
Powers of Attorney.
These documents are usually not designed for situations in
which
a family member will be applying for Medicaid.
For example, if there
is a husband and wife and the husband is entering the nursing home,
the
wife's Will usually leaves her assets to the husband. This needs to be changed. |