[1] Interplay with Transfer of Asset Issues

     There is no penalty for transferring assets into a special needs payback trust for the purposes of achieving Medicaid eligibility. However, transfer of asset penalties can apply when an individual, his spouse, a court, or any person creating a trust at the direction of an individual or his spouse transfers assets belonging to the Medicaid applicant into trust for the purpose of gaining Medicaid eligibility.

     Example: Jack is showing early signs of Parkinson’s disease at age 58. Fearing for his family’s financial security, he transfers all of his assets into an irrevocable trust and cedes all legal ownership of the assets to the Trustee, who is his son. His goal is to reduce his countable assets so that he can qualify for Medicaid benefits. The trust is not a special needs payback trust because Jack is not yet disabled as defined under federal law, and the trust does not meet the criteria to be a first-party special needs trust. Therefore, the transfer of assets into the irrevocable trust is subject to review and the possible determination that a transfer penalty applies.

     The same section of the federal law that provides for the creation of first-party payback trusts includes detailed criteria regarding the treatment of income and assets transferred into non first-party payback trusts. The law is clear that transferring assets into trust does not protect those trust assets from being considered when determining Medicaid eligibility, except in limited instances, and the transfers may be subject to the imposition of transfer of asset penalties. The law relates definitions for asset transfers and the penalties (periods of ineligibility for benefits) that can be applied.

(footnotes omitted) 

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*Mary Alice Jackson is a founding partner of Boyer Jackson, P.A., an elder law and special needs law firm founded in 1995. She is a Fellow of the National Academy of Elder Law Attorneys and is Board Certified in Elder Law by the Florida Bar. Mary Alice has been AV rated by Martindale Hubbell for the past 12 years. She is a Member and Past Chair (1999-2000) of the Elder Law Section of the Florida Bar, a past President of: the Sarasota County Bar Association, Tidewell Hospice, the Area Agency on Aging of Southwest Florida, and Senior Friendships Centers, Inc. She teaches Long-Term Care Planning in the LL.M. program in Elder Law at Stetson University College of Law, her alma mater (1991). Mary Alice is licensed to practice law in Florida and Texas, and maintain offices in Sarasota, Florida and Austin, Texas.

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