Disabled Child or Not? Timing is Everything

The last 2 weeks we were discussing the transfer of a home to a child who has been living with the parent in that home.  But, what about transferring the home to a disabled child?  Isn’t that an exception to the Medicaid transfer rules?

The answer is yes, but like all things Medicaid related, it is tricky.  A few weeks ago Rick called me with regard to his dad who needs nursing home care and will run out of funds to pay for it in 2 months.  Rick will need Medicaid for Dad.  He told me that 4 years ago Dad transferred his home to Rick.  I told Rick that this is a transfer subject to a Medicaid penalty unless Rick is blind or permanently and totally disabled. 

“No problem”, Rick said.  “I am disabled.”  Well, not so fast.  I explained to Rick that the disability determination must be made either by the Social Security Administration or the Disability Review Unit of the State of New Jersey’s Division of Medical Assistance and Health Services.  Rick told me he receives Social Security Disability payments.  I then asked him how long he has been on SSD.  His answer was about 2 years.  “That’s a problem”, I said.

I asked Rick to go back through his records and provide me with a copy of his approval letter from Social Security.  Sure enough, when he faxed that letter to me I saw that he was deemed disabled a full year after Dad transferred the house to Rick.  “Does that matter”, he asked.  Absolutely.  In order for the transfer to fall within the disabled child exception, Rick must have been disabled at the time of the transfer.

Rick told me the house is worth approximately $400,000.  At that value, the transfer penalty is 51.5 months, meaning Rick would have to pay for Dad’s care for that long before Medicaid will cover him.  So is that it?  Must Rick sell the home that he now lives in and spend down those assets?  Maybe not.  Next week I’ll reveal what I told Rick.