• Asset Transfers are closely examined by Medicaid.doctor desk image by dinostock from Fotolia.com
  
  Medicaid spend-down rules generally require individuals to spend their existing assets on medical care or certain other allowable expenses until personal assets are reduced to a point that qualifies a patient for long term care. Certain asset transfers are allowed (such as establishing a trust for a disabled child); however, Medicaid carefully examines transfers to determine whether an improper transfer of assets has occurred that would disqualify the applicant from Medicaid eligibility.
  
  

Fair Market Value

• The main standard for liquidation or transfer of assets is that the sale must be at fair market value (FMV). FMV can be determined by comparing the sale price of the item to comparable items in the specific geographic region. The proceeds from a FMV sale must then be counted as income toward coverage of medical costs.
  
  When assets or property are transferred for less than fair market value, a period of Medicaid ineligibility is created. This can lead to difficult situations where a patient does not have resources yet Medicaid will not provide coverage until the fair market value of the transferred assets has been spent on medical care.
  
  

Legitimate Purpose or Intent

• Transfers are examined in totality to determine whether fraud or some other disqualifying action has occurred. Medicaid generally looks back 36 months to determine whether an improper transfer has occurred.
  
  Recent legislation has given Medicaid examiners the authority to review financial documents which may have been used to shelter assets, such as annuities. If an annuity does not name the State as the remainder beneficiary, it will be treated as a transfer at below FMV and the full purchase price of the annuity is penalized.
  
  If the Medicaid examiner determines a violation has occurred, Medicaid will calculate a penalty period by dividing the FMV of the asset by the private-pay rate for the required care in the state. This amount varies from one state to another.
  
  

Exempt Funds

• Medicaid disregards certain exempt funds and assets which a person seeking Medicaid coverage is allowed to maintain. The major exemption is for a family home, assuming that the individual has a reasonable expectation of returning after hospitalization, or if a spouse or minor/disabled child resides in the home. In addition, life insurance and burial funds of up to $1,500 are exempt.