Question:  Would you please provide me with some information re: gifting as it relates to VA planning for Aid & Attendance.  It is my understanding that there are no penalties involved for gifting assets in order to reduce resources to approved levels.  Mom’s income is less than the medical expenses that she will pay in the assisted living facility, but her assets are a bit too high.

Answer:  At this time, gifting does not create penalties (or periods of ineligibility) for the purposes of VA pension benefits.  That being said, gifting for VA purposes may create penalties (periods of ineligibility) for the purposes of future applications for Medi-Cal for skilled nursing facilities.  Any time you do gifts for VA purposes, you should be structuring a plan that ensures that you will not be creating periods of ineligibility for future Medi-Cal applications.  Often a stroke, hip fracture, heart attack, or some other unexpected medical hospitalization and subsequent discharge to a skilled nursing facility will create a need for Medi-Cal benefits within the look-back period (currently 30 months after the gift was made, or 60 months in the case of gifts to irrevocable trusts, and 60 months for all gifts in the future when the Deficit Reduction Act is implemented with filing of final regulations with the Secretary of the State of CA).  If you have not structured the gifts to create either no period of ineligibility or very minimal period of ineligibility, then you will have shot yourself in the Medi-Cal foot when you do your VA pension gifts.  Because the gifting rules for Medi-Cal are complicated, see an experienced California attorney who knows the current rules about gifting.  Be sure to ask the attorney if they are experienced in the laws governing gifting under Medi-Cal and if they can structure a gifting program that will not create a period of ineligibility, or that will greatly minimize any gifting period of ineligibility.  Also, if you are thinking of gifting real estate, the rules are even more complicated for purposes of VA pension or Medi-Cal, and you will need an attorney with experience in both areas of law.  Any time you gift an asset that has appreciated in value since purchase, there will be tax issues to evaluation, discuss, and account for—income tax issues, capital gains step-up issues, 121 exclusions, property tax reassessment issues, so do not try to do this on your own.  Lastly, when someone needs VA pension now, it is not unlikely that they will need Medi-Cal within a matter of months or a few years, so always consider that VA gifts may create Medi-Cal penalties if not structured properly.   The area of gifts for VA and Medi-Cal is not a do-it-yourself proposition.  Get good legal advice and guidance. 

Dallas Leigh Atkins, Esq.
Law Offices of Dallas Atkins
Santa Barbara, CA  93101
805-687-8782
www.AtkinsElderCareLaw.com
Member of the national ElderCare Matters Alliance, California chapter

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Answer:  Georgia Medicaid policy, found at Section 2332 et seq. of VOLUME II/MA, MT 39-08/10 titled “Retirement Funds”, expressly exempt retirement funds, including, Individual Retirement Accounts (IRAs) Keogh plans, and some retirement profit sharing plans are “exempt” or non-countable resources for Aged, Blind, or Disabled classes of Medicaid, including Long-Term Care (Nursing Home) Medicaid if owned by the applicant/recipient if the applicant/recipient applies for “periodic” distributions.  To be eligible for ABD Medicaid, the individual must apply for periodic benefits.  If s/he has the choice between periodic payments and a lump sum, the individual must apply for periodic payments. 

A “lump” sum is a liquidation of the retirement fund.  There’s no requirement in the Medicaid plan that payments be taken monthly; payments can be made annually.  The Medicaid policy states “[p]eriodic retirement benefits are payments made to an individual at some regular interval (e.g. monthly).  The signal, “e.g.” means “for example”.  As a result, the use of “monthly” in the policy is intended only as an example of what “periodic payments” means.  

The caseworker is directed to determine if the applicant for Nursing Home Medicaid is eligible for periodic payments from the IRA.  If not, can the individual make a lump sum withdrawal.  If the individual is eligible and receiving periodic payments, the payments are treated as “income” only; the fund is disregarded as an asset. 

A retirement fund belonging to an applicant/recipient’s spouse is disregarded, regardless as to whether periodic payments are made. 

The income is budgeted with other sources of income the applicant receives.  For example, if she has Social Security retirement and the IRA distributions, these amounts make up her income.  Once Medicaid eligibility is established, Medicaid calculates a “patient liability” or cost-share which is her contribution toward the costs of her long-term care.  Patient liability is paid over to the nursing home each month.  

The IRA does not designate the State as the beneficiary upon death; she can designate whomsoever she wishes. 

It sounds like the Medicaid caseworker communicating with this family is confusing the treatment of an “annuity” with the treatment of “retirement funds” for Nursing Home Medicaid eligibility purposes.

David Paul Pollan, Esq.
The Pollan Law Firm
Atlanta, Georgia  30309
678-510-1358
www.PollanLawFirm.com
Member of the national ElderCare Matters Alliance, Georgia chapter