Radio Interview of Attorney John Frazier by Attorney Joe Pippen.
Attorney Joe Pippen: Now let’s go to Attorney John Frazier, who’s on the phone.
Attorney John Frazier: Hey Joe. How you doing today.
Attorney Joe Pippen: Good morning. John is our Medicaid Planning and VA attorney. He calls in every other week so it gives us a Medicaid Planning or VA tip of the week. What are we talking about today, John?
Attorney John Frazier: Today, I’m going to talk about what is the five-year Medicaid look back rule? I think that there’s a lot of confusion about this issue, given that every other week or so, I’ve got people contacting me about this issue. What the five-year Medicaid look back rule means is that in the State of Florida and probably most other jurisdictions, you can’t simply give your assets away to obtain Florida Medicaid. And if you do transfer your assets, there’s a presumption within five years that that transfer was done for the purpose of obtaining Medicaid.
There’s some exceptions to the five-year Medicaid look back rule. A person can transfer assets to their spouse. For example, there is a $2,000 asset limit for the Medicaid applicant. The spouse living in the community is allowed to have $130,380. And so let’s say that you have a married couple with $200,000 in assets, you can transfer $198,000 to the community spouse, bring the Medicaid applicant to his $2,000 asset limit. And that’s permissible, but you still have an asset problem for the community spouse. But that’s the example of how we move assets around to obtain Florida Medicaid.
There’s also a limited exception to an adult child who is disabled. There are some ways that you can transfer assets to an adult disabled child. I think another thing that creates a lot of confusion is some people have heard about this $15,000 annual exclusion. And so some families have started a gifting program to give away $15,000 or less to the children each year. What that has to do with is a filing of a IRS form 709 gift tax return. And it has absolutely nothing to do with applying for Medicaid. And if you do those transfers within five years, they’re considered to be disqualifying and you basically have to return that money to the Medicaid applicant in order to obtain Medicaid benefits for the Medicaid applicant.
I think another area of concern with the five-year Medicaid look back rule is sometimes people will try to do their own Medicaid planning and give away a bunch of money before contacting our office. Or sometimes they’ll actually have the nursing facility submit a Medicaid application, and there have been very significant transfers within the past five years.
DCF, the Florida Department of Children and Families, has what is called a data exchange system with the federal government. So for every Medicaid applicant and the spouse, DCF is going to type in the social security number and be able to pull up old 1099s. And let’s say for example, there was a $500,000 CD last year, which was not reported on the Medicare application. The State of Florida can find out about that and you’re actually legally required to disclose those transfers.
Another example I’ve seen is there’s confusion about the primary residence, which is exempt. Some people think, “Well since it’s exempt, you can just give the house away.” As a general rule, you cannot do that. But you can transfer the house to the spouse. And I’ve also seen some situations where people have applied for Medicaid and then sold the house and given away money while the person’s on Medicaid. And then DCF finds out about that. So there are many, many pitfalls. And that’s a basic overview of the five-year look back rule.
Attorney Joe Pippen: John, so let me ask you a question. So once in a while we get a client who is wealthy and their spouse has to go in the nursing home. And you have talked about this before, the just say no. The wealthier community spouse just says no, and the nursing home spouse can still qualify for Medicaid. Right?
Attorney John Frazier: Yeah. That’s called the spousal refusal strategy. And the way that works is you have to reduce the countable assets of the Medicaid applicant to less than $2,000. That’s an absolute requirement. However, you can transfer all the extra monies over to the community spouse’s name. So let’s say that you’ve got $1,000,000, so you can transfer all that about a $1,000 over to the community spouse. And then there are several forms that must be completed properly. And it’s a step-by-step process. So the Medicaid applicant must be below $2,000. The forms, the spousal refusal forms, must be properly signed. And then the Medicaid application can be filed. And I have 100% success rate in those cases at this point.
Now there is some very, very adverse case law on the spousal refusal strategy. It’s called the Feldman Case, Feldman versus the Department of Children and Families. Those procedures were not followed and the Medicaid case was denied. So I think it’s very, very potentially problematic to not use an attorney in most Medicaid cases where you’re doing asset restructuring, but especially spousal refusal.
Attorney Joe Pippen: All right. So I wanted to tie the transfer to your spouse rule with the five-year Medicaid look back rule that you were talking about as well. So a wealthy spouse getting ready to go into a nursing home can transfer their wealth to their community spouse who really didn’t have any assets. And then that community spouse can use the spousal refusal to pay for the nursing home spouse’s care and qualify for Medicaid.
Attorney John Frazier: Exactly. And when you use that strategy, the Medicaid applicant will basically be treated as an unmarried Medicaid applicant. And then in that fact pattern, let’s say that the spouse applying for Medicaid has $1,000 a month in social security. So the Medicaid spouse is allowed to keep $130 a month called the personal needs allowance. They’re allowed to keep their health insurance premium. Let’s say that they pay $200 a month for health insurance, Blue Cross Blue Shield, something like that. So instead of paying $9,000 or $10,000 or more per month, it’ll just be a $1,000 minus $130 minus $200. Meaning, we’re talking about paying about $700 a month and preserving all the assets. And the community spouse also is allowed to keep all of their income. So the community spouse keeps all the assets and all the income, regardless of how many assets there are on her side. So we’re very, very lucky that we can do that here in Florida, I think.
Attorney Joe Pippen: Yeah. So all those people out there who think they have too many assets so they would never qualify for Medicaid. This is just one example of where someone like yourself, who this is their full-time practice is helping people get Medicaid VA benefits can move things around a little bit and use different strategies and protect their hard earned dollars in their estate, they worked their whole life for, protect those for a family, for their legacy, and maximize what they can get from Medicaid or VA benefits. Correct?
Attorney John Frazier: Absolutely. And some of these facilities are charging up to $17,000 per month. You could be talking about paying $170,000 a year or more for a person’s care. And even if you’ve got a million dollars, a million dollars will be gone in five years or so at those kinds of costs.
Attorney Joe Pippen: All right. John, any other tips for the week?
Attorney John Frazier: No, I think that’ll do it.
Attorney Joe Pippen: All right. Well, thank you so much for calling in.
Attorney John Frazier: All right. Have a great day.
Attorney Joe Pippen: All right. All right. And go Bucks. Have a good Sunday.