Medicaid is a federally funded, state administered health care program for low income families and individuals. If you can't afford health care coverage and fall within certain income and asset guidelines, you may be able to qualify for Medicaid. If you have too many assets, gifting some of them to your children could be a possible route to getting Medicaid.
Medicaid is a type of health insurance that provides a wide range of health care services to those in need. Medicaid covers hospitalizations, surgery, doctor's visits and medications. Medicaid also provides for community-based care and nursing home care, including room and board, therapy, supplies and nursing care. Medicaid reimburses health care providers directly for their services. In some cases, you may be required to pay a co-payment for some services.
Medicaid requires you fit into an eligibility group that includes blind and disabled persons, families with children and pregnant women. You must also have a low income and low assets. However, the exact amount of assets you can have varies by state. In general, you cannot have more than $2,000 in assets, which includes bank accounts, stocks, bonds, cash values in life insurance and nonexempt real estate. Most states allow a well spouse to have assets up to $109,560 (as of January 2011).
Transferring Assets to Your Children
If you need to qualify for Medicaid, you may be thinking of transferring some of your assets to your children to get under the asset threshold. However, Medicaid law imposes a heavy penalty for transferring assets to your children. The penalty depends upon how much you gave away and how much the average cost of care is in your state. For example, if you give away $50,000 in assets to your children and the average cost of care in your state is $5,000, you will not be eligible for Medicaid for $50,000 / $5,000 = 10 months.
Exceptions to Transfer Penalties
Although you usually can't give away your assets to your children without incurring penalties, there are ways you can transfer assets without losing your Medicaid eligibility. If your child is blind or disabled, you can transfer assets to him without penalty. You can also transfer funds into a trust for your blind or disabled child, or for a disabled individual under 65 years old. If the asset is your home, you can freely transfer it to your child as long as she is under the age of 21, is blind or disabled, or is an adult child who has been your caretaker for more than two years.