Nov 11, 2021 What Transfers are Exempt Under Medicaid and Not Subject to Look Back in New Jersey?

When a person applies for Medicaid, the New Jersey Family Care Eligibility Determining Agency (EDA) verifies the information. The EDA examines each transfer made by a Medicaid applicant within a five-year “look-back period.” If an applicant violates this rule and is found to have gifted or sold an asset for less than fair market value, the agency will impose a penalty period (“a period of Medicaid ineligibility”).

However, there are some transfers that are exempt and not subject to the look-back. Here are the details about the types of transfers that are exempt in New Jersey:

Transferring the Family Home to Certain Specified Transferees

A Medicaid applicant is permitted to transfer the equity in his or her home to certain family members without being hit with a transfer penalty. These people include:

• The applicant’s spouse;
• His or her child if they’re either under age 21, blind, or totally and permanently disabled;
• The person’s sibling if he or she had an equity interest in the home before the transfer and resided in the home for at least a year before the individual was institutionalized; and
• The person’s adult “caregiver child,” provided that individual resided in the home for at least two years immediately prior to the date the Medicaid applicant was institutionalized and provided care to his or her parent that allowed him or her to reside at home rather than in an institution.

Note that if a blind or disabled child is getting Supplemental Security Income (SSI) from the Social Security Administration or Medicaid, an outright transfer will be exempt if the recipient uses the home as his or her primary residence. However, if and when the property is sold, it will be deemed excess resources. If it’s not sold, it may be subject to a lien when the SSI recipient dies.

And as far as an adult “caregiver child,” the care must have exceeded normal personal support activities, such as routine transportation and shopping. Moreover, the person’s mental or physical condition must have been such as to necessitate special attention and care. In addition, the care provided by the child must have been essential to the health and safety of the parent and consisted of activities such as (but not limited to):

• Supervision of the parent’s medication;
• Monitoring of the person’s nutritional status; and
• Insuring the individual’s safety.

Note that this exception isn’t applicable to the individual’s grandchildren or other caregivers.

Transferring property in this way will avoid the risk of a Medicaid lien and will keep the full value of the property for the new owner. However, transfer the property to anyone else will cause a penalty period.

Transferring Resources to Community Spouse or Disabled Child

The Community Spouse

A community spouse (also known as the “well spouse” or “non-applicant spouse”) is the husband or wife of a person who is getting Medicaid benefits.

Medicaid penalties don’t apply to the transfer of any asset to a community spouse, or for the sole benefit of the community spouse, provided he or she doesn’t then transfer the asset to a non-exempt transferee.

This transfer can be done as an outright transfer or via trust. In New Jersey, any assets owned by the community spouse that are in excess of the community spouse resource allowance (CSRA) are considered countable assets. Unlike New York, New Jersey doesn’t permit spousal refusal. That is a practice used by a community spouse in New York to shield additional assets – above the CSRA limits.

A Disabled Child

Medicaid transfer penalties are also not imposed when transferring resources to or for the sole benefit of Medicaid applicant’s blind or permanently and totally disabled child. But it’s important to understand that the transfer of liquid resources (cash or assets that may readily be converted to cash) to a disabled child who receives SSI or Medicaid may mean his or her disqualification from benefits. In that instance, it’s often advisable to transfer the funds into a Supplemental Benefits Trust, so that the resources are not counted as a resource.

Transferring Assets or Income to a Self-Settled Special Needs Trust

A Special Needs Trust (“SNT”) is a trust that holds the assets of a disabled individual.

Transfers of the applicant’s assets to a Special Needs Trust aren’t disqualifying transfers, and both resources or income may be transferred to this type of trust.

An SNT is created for the sole benefit of that individual and must be established before the beneficiary is 65 years old. It can be created by any of the following individuals:

• The disabled individual, if he or she is legally competent;
• A parent or grandparent;
• A legal guardian of the disabled individual with court permission; or
• A judge.

It’s important to know that Social Security income isn’t assignable and can’t be transferred to this type of trust.

Transferring Assets to Trust for Sole Benefit of Disabled Person Under Age 65

A child or other family member who’s disabled and under age 65 may also benefit from a discretionary trust, such as a Supplemental Benefits Trust. But note that this individual must satisfy the criteria for disability stated in the federal statutes and as further defined by the Social Security Administration.

Families should provide proof that the beneficiary medically meets those criteria. The applicant may fund a trust for that individual with his or her assets.

Transfers to a Beneficiary who is not receiving SSI or Medicaid

If the beneficiary isn’t getting SSI or Medicaid, a discretionary trust can be established – as long as no one other than the disabled person can receive the benefit.

Transfers to a Beneficiary who is receiving SSI or Medicaid

If the beneficiary is getting SSI or Medicaid, a Supplemental Benefits Trust should be used. For the transfer to such a trust to be exempt from penalty, the trust must satisfy New Jersey’s requirement of being “for sole benefit of” the disabled individual. Therefore, to keep its status as a “sole benefit” trust, the State of New Jersey must be named as the first remainder beneficiary upon the death of the trust beneficiary for reimbursement of Medicaid benefits expended on the grantor of the trust. This type of provision is also known as a “payback clause.”

It’s important to note that the appropriate government agency (the Social Security Administration [SSA] or the New Jersey Division of Medical Assistance and Health Service (DMAHS)) is informed that this trust has been established and funded. Ideally, prior to signing such a trust, a draft should be provided to SSA for review, so that the government can confirm that the trust won’t be treated as either income or an asset belonging to the disabled individual in receipt of SSI.

Transferring Assets to a Pooled Trust

Federal statutes say that the transfer of assets to a pooled trust is an exempt transfer.

This type of trust is created and managed by a nonprofit organization with subaccounts for each disabled beneficiary. A pooled trust is an irrevocable supplemental needs trust (SNT) that permits those with disabilities seeking long-term care services to spend down excess funds to qualify financially or maintain eligibility for Medicaid. This gives individuals with disabilities a way to access health benefits while using the excess funds they deposit into the trust to pay for items and services that aren’t covered by those benefits.

New Jersey’s regulations limit this exemption to transfers by applicants who are under age 65.

Ely J. Rosenzveig & Associates, PC, helps individuals in the tri-state area adapt their circumstances, and implement planning strategies to help them qualify for Medicaid benefits.

Contact our experienced attorneys either online or at (914) 816-2900. We welcome the opportunity to meet with you in person, via video conference, or by phone, and answer your questions regarding your specific health care needs, Medicaid benefits, and how we may help you to protect and preserve your assets.