Excerpt from: Mullen & Giarusso (click for full article)
It has been called the State Budget Busting Act, the Charity Chilling Act, the Nursing Home Bankruptcy Act, the Boon To Private Insurance Act and many more. This is because the Deficit Reduction Act (DRA) of 2005 dramatically impacts various sectors of the economy and society as a whole. Of course, seniors will suffer the most from these new changes. Your elderly clients or friends will find it much more difficult to qualify for Medicaid assistance for nursing home stays, and will be subject to harsher penalties for gifting.
Some of the most alarming changes brought about by the DRA include:
• The waiting period for asset transfers has been increased from three years to five years. If it is determined an asset was transferred (given away) for less than fair market value during the new five year look-back period, a penalty will be assessed, making the applicant ineligible for Medicaid for a number of months, even years. This means a nursing home stay will have to be paid for privately. How many of your elderly clients or friends have the ability to predict the state of their physical and mental health three years from now, let alone five?
• The penalty period for giving assets away now starts at the time
the person enters a nursing home and is otherwise eligible rather than
at the time of the asset transfer. Obviously, this change can
dramatically increase the amount of time an applicant will be ineligible
• A cap of $750,000 has now been imposed on the value of an exempt residence, beyond which there will be no exemption for a homestead—the average person’s most valuable and cherished asset.