Under the new Medicaid transfer criminal provision, effective in 1997, Mr. Jones could be subject to a criminal penalty if he made the transfer to become eligible for Medicaid, and he applies for Medicaid and becomes subject to a period of disqualification. One rule of thumb when transferring property for less than full consideration, for purposes of Medicaid planning, is to retain enough assets to be able to pay for nursing home care for the duration of the penalty period. However, this is only a generalization. Every situation is different. Use of trusts.
Irrevocable trusts are another planning tool to help manage the cost of long-term care.
Trusts that can be revoked by the creator of the trust are considered countable assets by Medicaid and have no impact on Medicaid eligibility. Federal law also recognizes certain trusts created for the benefit of persons with disability under sixty-five. Generally, parents who are planning for the long-term care of an adult, disabled child may want to consider this type of trust. The problem faced by some persons in these states is that their income may be just over the Medicaid income cap but less than the amount needed to pay privately for a nursing home bed. These trusts work by paying out a monthly income just under the Medicaid cap and retaining the rest.