Advanced Underwriting Consultants

Ask the Experts – October 2nd

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client disclaimed assets from her husband’s estate. Will this disclaimer affect her Medicaid benefits?

Answer:  Most likely, as long as the disclaimer occurs within five years of her application for Medicaid.

To qualify for Medicaid, an unmarried nursing home patient may have no more than $2,000 worth of countable assets. Those with assets exceeding this amount often donate a portion of their countable assets to another person, usually a family member, to qualify for Medicaid. However, if the transfer occurs within five years of application, the applicant could face penalties, so most applicants wait until the five-year look back rule has expired.

A disclaimer is not considered a transfer for gift tax purposes. However, it is an action for the purpose of Medicaid rules. For the purposes of determining the resources of an individual, “assets” include resources which she “is entitled to but does not receive because of action by any person.” 42 U.S.C. 1396p(e) (emphasis added).

Because of this, if your client disclaimed the estate within five years of her application of Medicaid benefits, she may be subject to a penalty. Note, however, that a refusal to take an elective share is a non-action, so this would not affect your client’s Medicaid benefits.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.