If your parent is applying for Medicaid to cover nursing home care in New York, the agency may review certain transfers made during the previous five years. Giving away assets for less than fair market value during that period can result in a penalty. Knowing which exceptions apply allows you to prepare for any issues going forward.
Home transfers to certain relatives
One exception can apply if you or one of your siblings lived with your parent for at least two years immediately before the nursing home admission. The person receiving the property must also have provided care that allowed your parent to remain at home during that time. Providing similar assistance alone does not qualify someone for this exception.
A separate exception applies to your parent’s brother or sister if that person has an ownership interest in the property and lived there for at least one year immediately before the admission. Unlike the caregiver-child exception, this depends on the sibling already having a financial stake in the home before the transfer.
Gifts for a disabled beneficiary
Your parent may transfer assets to a son or daughter of any age who is blind or disabled without triggering the usual lookback penalty. This exception applies whether the property passes directly to that person or through a qualifying trust established solely for their benefit.
Your parent may also transfer assets to a trust established solely for another disabled person under age 65, even if that beneficiary is not your sibling.
Sales at fair market value
Not every transaction during the five-year period creates a problem. Your parent may avoid a penalty by showing an intent to receive fair market value or other valuable consideration, even if what they ultimately received fell short. This also allows an exception when the transaction occurred exclusively for a purpose other than qualifying for Medicaid, although that purpose can be difficult to prove.
The sale does not create an uncompensated transfer. What your parent receives in exchange is still subject to Medicaid’s ordinary resource rules and can affect eligibility if it remains countable.
Options after a lookback penalty
If you discover a transaction that could result in a penalty, you can gather records showing why an exception applies. Caregiving documentation supports a qualifying home transfer, while appraisals, contracts or payment records may establish what your parent received in exchange.
When no exception applies, returning all assets given away for less than fair market value might prevent the period of ineligibility from applying. Your parent may also seek an undue hardship waiver if they are otherwise eligible for Medicaid, cannot obtain appropriate medical care without it and have made reasonable efforts to recover the property or receive its fair market value.