Kentucky Bankruptcy Law

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Recent Medicaid changes create significant changes in estate planning

Changes made to Medicaid from the Deficit Reduction Act of 2005 closed off significant estate planning routes. This excerpt from Kentucky’s Medicaid manual detail the changes:

Most significantly, the look back period for ALL transfers from the date of application for Medicaid coverage for nursing home care is five years (60 months) for any tranfer made after 2/8/20067. Previously, you could transfer assets to a friend or relative and have only a three year (36 month) look back. So, if you owned a $200,000.00 house outright and wanted it to remain in your family, you could deed it to that person and hold your breath for three years, hoping you did not need long term care during that time. Two years have now been added on to that period. Since long term care averages around $4,500 per month (about $150 per day) in Kentucky, any substantial time in long term care could exhaust the estate you have worked your entire life to obtain.

Another significant change is that the transfered resource factor applied to transfers within that look back period will be a daily rate instead of monthly. This factor is based on the average private pay cost of nursing home care in Kentucky and is $4,584 per month for Kentucky in 2007. In previous years, any transfer within the look back period would be divided by the factor and rounded down. So, if you transferred $8,700 to a relative, then that would have been about 1.9 times the factor. Your penalty would be denial of Medicaid coverage for 1 month of care because the 1.9 would be rounded down. Now, with the factor being applied as a daily rate of $150.71, the same transfer would be 57 days. This overlaps with the final significant change. All transfers during the look back period are aggregated as a total amount prior to applying the factor. Careful giving to maximize that rounding down no longer works to shorten your penalty period.

What this all amounts to is that estate planning must be done relatively early in life and revisited with significant changes to Medicaid and to the tax code. However, even into ones 70s, 80s and beyond, estate planning can make differences. Essential to the process is holding in reserve enough assets to pay for private care during any penalty period expected from transfers of assets.


July 8, 2007 - Posted by | Estate Planning

1 Comment »

  1. Help Please!
    We recently received a letter stating that my Granny’s estate can be taken by Medicaid!? I am trying to research this to make sure it is not a fraud before she sends too much information to the wrong people! Now I am reading that they can take what little she has??
    She is on disability. It seem that since she has had her hip and both knees replaced, a greater focus has been placed on her. She could not walk prior to the operations and still suffers great pain with movement.
    Please help us sort out this injustice.? She does not have much to leave the ones she loves.
    Could you ‘point’ her/us to someone, somewhere that can ease the panic and stress through which she contacted me??

    Comment by Sherry | June 18, 2009 | Reply

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