Transferring assets can result in a penalty causing ineligibility for long-term care Medicaid. There are some exceptions to the rule (particularly with regard to disabled children). As a result of the Deficit Reduction Act of 2005 (“DRA”) signed by President Bush on February 8, 2006 (which was implemented in Texas on October 1, 2006), the rules regarding transfers for less than fair market value have changed for transfers that occur on or after February 8, 2006. Transfers for less than fair market value on or after February 8, 2006 are subject to a 5 year look-back period. For transfers on or after February 8, 2006, the transfer penalty period resulting in ineligibility for long-term care Medicaid starts from the date of application and from when one is otherwise eligible for long-term care Medicaid. Under DRA, the presumption is that any uncompensated transfer (even a gift to a charitable organization) within the 5 year look-back period was done for the purpose of obtaining Medicaid benefits. So, under DRA, if you made a gift to a charitable organization and 4 years later you had a stroke and applied for Medicaid, the presumption is that the gift 4 years earlier was for purposes of obtaining Medicaid and the period of ineligibility would start when such person applied (assuming it was within 5 years of the uncompensated transfer) and is otherwise eligible for long-term care Medicaid and not from when one made the transfer. The applicant would need to rebut the presumption by claiming it was done for a purpose other than for purposes of qualifying for Medicaid. Notwithstanding DRA, there are still planning strategies presently available for asset preservation – even for transfers within the 5-year look-back period. The transfer penalty divisor (representing the average daily cost of a nursing home in Texas) is $237.93.