San Antonio, Texas (210) 826-1122
Bellevue, Washington (425) 296-2919

8031 Broadway
San Antonio, TX 78209
*Licensed in Texas
PO Box 40106
Bellevue, WA  98005
**Licensed in Washington State & Colorado

San Antonio Probate, San Antonio Estate Planning, San Antonio Elder Law


San Antonio Express-News, August 29, 1996

Transferring Assets to Get Medicaid becomes a Crime

© 1989-2004, Paul Premack

The new Health Care Portability and Accountability Act of 1996 that Congress passed (and the President signed last week) had a hidden surprise. They threw in a provision that fundamentally changes the nature of Medicaid planning.

Let me start at the beginning: Medicaid is a welfare program designed for low-income and low-asset families. A large part of Medicaid’s budget pays for nursing home care for the elderly. Generally to qualify for Medicaid, an individual’s countable assets cannot be greater than $2000 (or for a couple, $3000). However, the law has for years included several ways for a person to adjust his or her assets to qualify. One of those methods was to transfer (that is, give away) all or part of your assets.

Giving away assets has always been risky business. Many people wrongly believe that they can simply give away their savings and immediately qualify for Medicaid. That was never the case. Instead, the law has for years imposed a disqualification period if assets were given away. The basic premise was “if you could have kept the money and paid for the nursing home, Medicaid won’t pay after you’ve given the money away.” Those rules still apply.

The new law, however, seriously intensifies the rules. As of January 1, 1997 (only 5 short months away) it will be a FELONY to give away assets with the intention of qualifying for Medicaid.

I stress that FELONY means “crime," and “crime” means potential prosecution, jail time or monetary fines. Anyone who casually gives away assets to qualify for Medicaid will now be playing a very dangerous game. The popular misconception that you can easily qualify for Medicaid even though you have substantial assets must change. You are now at risk of criminal penalty if you transfer assets.

That strong warning given, I must get technical. Although the new criminal statute is quite specific, it may not be possible to enforce the law with precision. It says that a person commits a crime if he “knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance under a State plan under title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under Section 1917(c)”. The statutory references are to the Social Security Act, part of the United States Code.

To be guilty, you must “knowingly and willfully” dispose of assets. The purpose of the disposal must be “to become eligible” for Medicaid. Any other viable reason for disposing of the asset removes it from the criminal sanction. Finally, there will be criminal sanctions only “if disposing of the assets results in the imposition of a period of ineligibility”.

A period of ineligibility is very hard to predict. Under current rules, a person could make a gift but then wait 36 months before applying for Medicaid. There would then be no “period of ineligibility” imposed, and no criminal violation. But the 36 month rule COULD CHANGE without much warning. The best laid plan can be undercut if Congress adjusts the penalty period, possibly converting your harmless plan into a criminal act.

The best advice I can give now is to be very careful. There should be no more “casual” Medicaid planning done. Don’t listen to the scuttlebutt or rumors about the rules. If you get bad information, you could face criminal prosecution. Always consult with a qualified attorney before you manipulate assets in conjunction with Medicaid planning.


NOTE: Congress repealed this provision after about 7 months of protest from Seniors and from the Press. Read an article on its repeal.

Prior column: Mom can't do this! (Can she?)
Next column:
Refusing Resuscitation is Legal

Submit a Question or Comment.

Disclaimer: This column answers a specific legal question offered by an individual in the South Texas area. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice that meets your individual needs. It may give you a solid basis for discussion with your own attorney. Also, please be aware that laws change. You should consult with your personal attorney before you take any action on this or any legal issue.


NOTICE: The fact that you read this website does not make you our client nor us your attorneys. The material and information on this website and associated blogs are provided strictly for informational purposes and are not legal advice. This site does not create an attorney-client relationship between our attorneys and the users of this site. Visitors to this site should consult a licensed attorney before taking any legal action.