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Are Christmas & Birthday Gifts Exempt From Medicaid鈥檚 Transfer Penalty? - YouTube
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hey everybody again this is Paul
Rabalais estate planning attorney and in
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this video we're gonna talk about
whether there is a Christmas and
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birthday gifts exemption from the
Medicaid transfer penalties alright so
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that's a mouthful let me give you the
background then I'm gonna give you the
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answer go through some examples so you
really understand how this works
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so to really back it up one aspect of
estate planning these days particularly
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for the middle class is not only
providing for where their assets that
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they have remaining when they pass away
go and who's going to be in charge of
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seeing to it that that gets done don't
alone not only is that an important part
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of estate planning but the bigger worry
that many people tell me they have is
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they want to try to protect what they
have in case they go to the nursing home
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they say things like Paul I want to
protect it from the government Paul I
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want to protect it in case I go to the
nursing home Paul I want to protect it
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in case I get sick because they know and
they've seen it with their parents and
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grandparents and aunts and uncles and
others that when somebody goes into a
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nursing home if they have any money if
they have any what's called countable
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resources the nursing homes depending
upon where you live in this great
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country they cost maybe six to ten
thousand dollars and you have to pay for
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it out of your own pocket until you get
down to owning two thousand or less than
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two thousand dollars before long-term
care Medicaid pays that skilled nursing
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home care so that's a big deal now now
some people transfer assets out of their
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name before they go into a nursing home
so that when they go into a nursing home
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they don't have the assets with an
expectation of qualifying for the
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nursing home most people are familiar
with the you know five year look-back
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period which generally means that assets
are protected if they are transferred
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out of your name more than five years
prior to going into a nursing home and
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applying for Medicaid and there's lots
of other videos that me
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and others have made about when you do
transfer SS out of your name whether you
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should transfer them to individuals like
your children or to certain trusts for
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the benefit of your children so that
they get it after you pass away so more
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on that but for now we're just talking
about how some people transfer assets
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out of their name to protect those
assets from that forced spin down in
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case they go into a nursing home owning
those assets so some people ask me like
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the person who asked me today like the
person who will ask me next week and
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like the 15 or 20 people who will ask me
next year or next month or whatever but
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Paul there's I know that you know the
big stuff got to got to get it out of
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your name you know the land and the
investments but they don't penalize you
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for making Christmas and birthday gifts
do yeah that's that stuff's all okay
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what's that kind of minimum amount you
can give as a birthday or a Christmas
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gift that they just don't worry about so
you know get that people all of the time
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get that question all the time with
people expecting me to say something
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like oh yeah you're right there's the
old Medicaid Christmas gift and birthday
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gift exception which says you can give
away up to X dollars if it's for
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birthday and if it's for Christmas and
Medicaid doesn't worry about it
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that's what they expect to hear out of
my mouth but I've never told that to
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anybody because it doesn't exist so I
want to I want to really have you
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understand how that works by giving you
a a specific example so let's talk about
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Esther and Esther has got some dementia
going on Alzheimer's dementia and the
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family realizes you know she's got kids
and grandkids that all have been helping
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out and supporting her and loved her but
but really everybody realizes that
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Esther's been living independently
perhaps in her home or in an assisted
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living facility but it's almost time for
Esther
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move into a nursing home so you know
people realize that her kids realize
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that the nursing home costs you know
seven thousand dollars a month and so
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the kids kind of know enough to know
that maybe they can do some things to to
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spend some of Esther's money down so she
doesn't have to spend so much at the
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nursing home so Esther you know she goes
out and she pre pays her funeral and she
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buys some furniture and some metal
medical equipment that she'll need for
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herself at the funeral home and perhaps
even maybe we could even say in this
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example that six years earlier Esther
had had moved her two hundred and fifty
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thousand dollar investment account out
of her name and she moved her her home
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and her piece of rental property out of
her name and she moved the rental
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property out of her name because that's
accountable resource that that would
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have to be sold and spent before she
qualified for Medicaid and she moved her
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home out of her name because that's an
exempt asset that subject to Medicaid
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estate recovery rights when Esther dies
they can recover the Medicaid payments
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that they had made on her behalf so
maybe she transferred all of that stuff
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out of her name six years ago which is
more than the five year look-back period
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or we could say in this example you know
Esther didn't even have any of that
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stuff so all she had was the money in
the bank
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either way the the situation is gonna
work itself out the same way okay so now
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it's a couple of months later and Esther
went and paid for her funeral bought
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some equipment bought some furniture but
she still got fifteen thousand dollars
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left in her checking account and yes
maybe you know six years ago she had
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transferred the the larger assets in her
estate out of her estate but it's been
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more than five years so that stuff is
kind of all clear now so the family
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realizes Esther has $15,000 she's you
know prepaid her funeral she spent all
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that she can spend on herself so the
family just a
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Elly realizes that she's gonna have to
pay for the first couple of months of
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nursing home of her nursing home care
out of her own pocket to get her $15,000
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checking account down to less than
$2,000 and if she private pays for two
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months $7,000 a month then her checking
account will go from $15,000 to $1,000
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and the family's thinking she will not
have made any transfers out of her name
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in the previous five years so she'll be
eligible for Medicaid and Medicaid will
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pick up the tab for the rest of Esther's
life so at that point Esther or her
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children on Esther's behalf apply for
Medicaid and I have a couple of pages
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from the Medicaid manual right here in
my hand so they're filling it out
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putting Esther's name her address her
medical condition start listing the
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assets that met Esther has she's got a
thousand dollars in the bank they list
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whatever Esther's income is she's
getting so Social Security maybe even
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getting some pension and then they come
to question number 31
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question number 31 and is have you
meaning s turd and I'm paraphrasing it
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have you given away any item of value in
the past 60 months no you know family
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starts realizing well you know Esther
you know for four decades she's been out
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of her checking account she's been you
know giving away $500 to her for each of
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her four children every time her
children has a birthday and every
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Christmas she gives her each of her four
children $500 and then you know what
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Esther is a great grandmother she likes
to and has been always did it gave her
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grandchildren she's got 12 grandchildren
she gave each of her grandchildren 250
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dollars every time her grandchild had a
birthday and for Christmas she would
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give each of her grandchildren two
hundred and fifty two hundred and fifty
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dollars so when they get to that
question
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they they they talk about it and they're
like well you know it you know Esther
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did did give away you know says anything
of value in the last sixty months so
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they so they check yes and then it goes
on to ask what was transferred when was
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it transferred who was it transferred to
how much was it worth so they they
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disclose all of those birthday and
Christmas gifts they they asked the
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Medicaid people or the nursing home
administrator and of course you know
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Esther and her family certainly aren't
gonna lie about anything and they
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certainly don't want to commit any kind
of Medicaid fraud so they just disclose
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those those little gifts there but but
in the past 60 months when you add up
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all those birthday and Christmas gifts
Esther had transferred fifty thousand
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dollars out of her out of her name or
given it away in the previous five years
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twenty thousand dollars over five years
to her four children thirty thousand
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dollars over five years to her twelve
grandchildren and so so now they're like
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you know like I said they're not gonna
lie because and and no one should ever
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lie on a Medicaid application in fact
that was question 31 and then right
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after that is the rights and
responsibilities which I'm just gonna
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read you one or two sentences by signing
this application
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you understand that and this is a
Louisiana thing but most states are
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similar you understand that the
Louisiana Department of Health will
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check the information you give us to
make sure it is accurate you give by
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signing this you give the Louisiana
Department of Health permission to
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contact any outside source necessary to
check this information process your
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application determine eligibility and
otherwise operate the Medicaid program
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these outside sources may include and
it's got about ten things but one of
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them it says the Louisiana Department of
Health can contact and you're giving
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them permission to contact your banks
financial institutions and such and such
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and such and such okay so you jot all
that down you write all that down and
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then what happens is so the families had
a point right now where Esther has one
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thousand dollars in her checking account
she's in the nursing home the nursing
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home costs
$7,000 a month the family is expecting
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for Medicaid to pick up that tab from
here on out but on the Medicaid
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application the family discloses that
boy those 250 and $500 birthday and
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Christmas gifts really added up Astor
transferred $50,000 out of her name in
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the previous five years so now what's
Medicaid gonna do well the first thing
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they're gonna do is they're gonna deny
her Medicaid application and they're
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gonna deny it because she made transfers
in the previous 660 months and then
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they're going to assess what's called a
penalty period and what they do is and
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I've got certain provisions of our
Medicaid manual the Louisiana Medicaid
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eligibility manual right here and the
first thing that they'll point out is
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that Louisiana has what's called an
average monthly private pay rate for
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nursing facility services and Louisiana
has determined whether this is actual or
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not that the average monthly cost of a
nursing home in Louisiana is $5,000 so
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what they're gonna do is they're gonna
add up all of Esther's transfers in the
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previous five years all those Christmas
and birthday gifts and they'll realize
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that it was $50,000 and they will divide
those the total amount of those
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transfers within the previous five years
$50,000 they'll divide it by the average
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monthly private pay rate for nursing
facility services in Louisiana which
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they say is $5,000 $50,000 divided by
$5,000 equals a 10 month penalty period
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so they tell Esther and they tell
Esther's family I'm sorry she her
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Medicaid application is denied she will
not be eligible for Medicaid until 10
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months from now so a little a little bit
more backup on that so even though
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Esther made those transfers over the
previous five years this 10 month
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penalty period won't and can't start
until Esther is in the nursing home she
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applies for Medicaid and she would
qualify except for the fact that she had
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made some transfers in the in the
EVs five years so she's in the nursing
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home she has to have less than $2,000
and she she can't apply and have that
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penalty period start until that time so
now the family's in a pickle because
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Esther has $1,000 Esther's got to stay
in the nursing home and Medicaid is not
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gonna contribute a penny for the next
ten months so with the nursing home
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costing $7,000 families about seventy
thousand dollars short because that's
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what it's gonna cost to keep Esther in
the nursing home for the next ten months
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while this penalty period runs its
course so clearly there you know any
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transfer of resources is whether it's
around Christmastime or whether it's a
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birthday gift can can really adversely
affect someone's Medicaid eligibility I
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will point out one other thing and love
to get some contributory comments right
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down below in the comments but I've
never seen somebody successfully argue
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this but it does say in our medicaid
manual in the section on transfer of
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resources for less than fair market
value which is what Esther did it does
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say in all cases the individuals shall
be offered the opportunity to rebut the
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presumption that a transfer was made to
reduce assets in order to qualify for
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Medicaid convincing evidence must be
provided which establishes that the
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transfer was solely for a reason other
than to qualify for Medicaid now every
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transfer is presumed to be you know with
the intent to qualify for Medicaid and I
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guess that I've never seen someone
successfully argue that that a transfer
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should not be penalized okay
so be aware of that I'll keep getting
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the same question and I'll keep given
the same answer it's not the answer that
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someone would expect I guess I guess the
public thinks that the government has
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written in some exception for Christmas
gifts and birthday gifts but they
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so sometimes you know long time things
that families have done for a very long
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time have to be disrupted for the
purpose of trying to make it easier to
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qualify for Medicaid and and protect
what you have so be aware that you know
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Esther had been given those gifts for
decades and really if Esther would have
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done things according to the rules to
try to protect what she have she would
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have stopped making those transfers on
an annual basis and maybe she would have
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transferred a larger amount and then
stopped and let the five-year period run
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but there's a lot of strategy that can
go into what what's the best thing
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Esther should have done really important
though to me if you would hit this um
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the subscribe button and then the
notification bill that's attached to it
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give it a thumbs up
I'd give make these publish a video
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every day ten o'clock a.m. Central Time
just to educate more people about estate
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planning and what's involved and so that
you'll have more control and power over
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keeping what you have keeping it in the
family keeping in the bloodlines setting
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things up so it's easy and for your
family to enjoy what you've worked for
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so you'll have a great day see you next
time
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