As we age many of us will reach a point where we need help with our daily activities. If our care requirements go beyond what our family can provide we will have to pay for help in meeting our daily needs.
This kind of help is called “long-term care” and it is expensive. Average costs range from $19 an hour for home help with household tasks to $240 a day for a private room in a nursing home. (See 2014 Survey details the cost of Long-Term Care Services and Supports). It's no wonder that seniors struggle with finding ways to obtain the care they need and pay for it without using up all of their income and savings.
The problems of aging and the cost of care become even more complicated for seniors who have been providing financial support for a disabled child. What will the child do for financial support when the parent’s money is gone?
In general, Medicare does not pay for long-term care. Medicaid is the major governmental program that helps seniors pay for long-term care. But you have to qualify financially for Medicaid and the law may limit your ability to give away assets in order to meet the qualification level. It imposes a period of ineligibility for benefits if assets have been given away during the preceding five years.
Exception to the Transfer Penalty Rules
The section of Medicaid law that penalizes transfers of assets includes a number of exceptions. One important exception applies to transfers that are made by a parent to his or her disabled child. This exception is found in the federal law at 42 U.S.C. § 1396p(c)(2)(B)(iii).
Several years ago the Pennsylvania Medicaid agency (the Department of Public Welfare or “DPW”) issued a policy clarification to help spell out the “disabled child” exception from the Medicaid transfer penalty rules. The policy clarification (PMN15789440) was dated May 18, 2011. It answers four key questions:
1. Can assets be transferred to an individual's disabled child?
2. Is there an age limit for the individual’s disabled child?
3. If assets are transferred will a penalty period be imposed?
4. Could the asset transfer affect the eligibility begin date?
Here are the answers to these questions as provided by DPW’s Division of Health Services:
1. Yes, assets (income and resources) may be transferred to an individual’s child, who is disabled per Social Security (SS) standards for the sole benefit of the child. The disability must be documented.
2. No, there is no age limit for the individual’s disabled child, including an adult child.
3. No, a penalty period will not be imposed if the asset is transferred to an individual’s child who is documented as disabled per SS standards.
4. Yes, if an individual applying for Medical Assistance (MA) and payment of Long Term Care (LTC) services must reduce resources to be eligible, it could affect the begin date of eligibility, if the assets are transferred to an individual’s disabled child. I.E. Mr. B is requesting MA LTC effective 2/15/11 and has resources totaling $15,000. He has a child, who is documented as disabled per SS standards. On 2/28/11, he transfers $8,000 to his child for the child’s benefit. Mr. B would be eligible for MA LTC on 3/01/11 if all other conditions of eligibility are met.
Important Note: If you are considering making a gift to a disabled child you must first factor in the issue of maintaining a disabled beneficiary's eligibility for means-tested government benefits like Medicaid and SSI. Consult an experienced elder law attorney before you make the gift.