People often don’t realize the limitations of Medicare until they don’t have the coverage they need. Medicare doesn’t offer very robust rehabilitation coverage. It also won’t pay for skilled in-home nursing support or nursing home expenses.
Therefore, many people find themselves frantically trying to meet the strict financial limitations for Medicaid when they already know they need benefits. Doing so opens someone up to penalties.
The Medicaid application process involves a review of your finances going back 60 months or five full years. You could face a penalty for certain transactions made during that time stop if they seem like intentional divestment.
What constitutes divestment?
Giving away your property is the most obvious form of divestment. If you have made major gifts to family members or friends in recent years, you can expect that the state will hold you accountable for that by assessing a penalty. Vehicles, jewelry and financial resources can all be dangerous gifts if handed out shortly before you need Medicaid coverage.
Gifts aren’t the only form of divestment that puts you at risk. Selling any of your property for less than the fair market value can also trigger a Medicaid penalty. Even gifts that you made to charity could lead to penalties for you.
How do you avoid the Medicaid penalty?
The only surefire way to avoid triggering the penalty when you apply for Medicaid is to have made any necessary transfers to family members or into a trust at least five years before you need benefits.
Thinking ahead as you approach retirement can be a great way of ensuring that you can qualify for Medicaid if you need it in the future.