Medicaid Spend down – More Involved than First Meets the Eye – Part 2

In my blog post last week, I told you about a call we received from Mary concerning Medicaid.  As is often the case, Mary initially disclosed what she thought were relevant questions about her mom’s potential eligibility.  She was seeking confirmation that the answers she had arrived at were correct and that getting Medicaid would be relatively simple and straightforward.  Unfortunately, she was mistaken.

As I mentioned last week, Mary described her brother as “disabled”.  He has a relatively low IQ but is able to work a minimum wage job.  He is on Medicaid for health insurance and also qualifies for food stamps.  Mary explained that 10 years earlier, Mom had set up a special needs trust (SNT) for him.  Mary’s belief was that she could now transfer to that SNT the home he lives in which she had purchased 15 years ago.

Once Mary told me that her brother was working, I knew he hadn’t been deemed disabled by Social Security and sure enough she confirmed that her parents had never pursued any diagnosis or designation.  I explained that transfers to a disabled child or a trust for the benefit of a disabled child did not result in a Medicaid penalty, but her brother had not been deemed disabled.

Mary was a bit confused.  “But Mom set up an SNT for my brother and he is on Medicaid”, she replied.  I explained that he was on the health insurance Medicaid program which does not require recipients to be disabled.  In fact, most are not.  Their low income and asset status makes them eligible for these benefits.

The SNT can still hold assets for her brother so that he does not lose his own Medicaid status but the issue we were concerned with was Mom’s Medicaid eligibility.  Any transfer to the SNT would result in a Medicaid penalty for Mom unless the transfer occurs at least 5 years and a month before Mom applies for Medicaid.  Had Mom transferred the home to the SNT 10 years ago when the trust was established, it would not have been a problem now.

Mary replied that Mom has no more money to pay for care.  I corrected her that, in fact, Mom still has other assets.  I’ll explain what I mean next week.