HOW TO AVOID FRAUDULENT TRANSFERS IN CALIFORNIA MEDICAID PLANNING

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1 If you are applying for Medicaid benefits, or if you expect to apply in the future, there are certain rules and regulations relating to eligibility for Medicaid benefits that you should be aware of. HOW TO AVOID FRAUDULENT TRANSFERS IN CALIFORNIA MEDICAID PLANNING Scott P. Schomer Los Angeles Estate Planning and Elder Law Attorney

2 Medicaid is a benefits program that is considered a payer of last resort. That means, all other sources of payment for medical treatment are required to be used before Medicaid benefits will begin to pay for long-term care. In general, applicants for Medicaid must have very limited income. So, if your assets exceed that limit, and you begin giving away your property, you must be sure to avoid fraudulent transfers. 2

3 Medicaid Eligibility in California California s state Medicaid program is referred to as Medi- Cal. You must be either a U.S. citizen, U.S. national, permanent resident or legal alien, and you must be a California resident. Applicants must have very limited income and be either pregnant, blind, have a disability or a family member in your household with a disability, be responsible for children under 19 years of age, or be 65 years of age or older. 3

4 The Definition of a Fraudulent Transfer Generally speaking, a fraudulent transfer is made when you move your assets out of the reach of creditors, when you are aware of a creditor s claim. The classic example is when an individual did not have an asset protection plan in place, but after they have a judgment against them, they attempt to transfer their assets to someone else. 4

5 Fraudulent Transfers Relating to Medicaid Eligibility A fraudulent transfer can also occur if an individual gives away assets in order to qualify for Medicaid. There are specific laws that discourage, and even punish, individuals for giving away their property in anticipation of applying for Medicaid benefits. 5

6 The Five Year Look back Period Federal law actually requires state Medicaid agencies to investigate transfers and gifts made by applicants during a specific period of time, know as the five year look-back period. This means, if you give away any of your property or assets right before applying for Medicaid, you may be considered ineligible for long-term care benefits for certain period after your application is acceptedyour state Medicaid agency will examine all transfers you made during the five years before you submitted your application, no matter how innocent they may have actually been. This potential penalty period only applies to individuals needing long-term care in an institution, or who receive home health care. It does not apply to individuals who need what is referred to as acute care, such as hospitalization or physician services. 6

7 Factors Considered in Determining Fraudulent Transfers You may be found guilty of a fraudulent transfer if the following occurs: You transferred any property to someone else You received less than fair market value for it The transfer left you unable to satisfy a creditor The laws prohibiting fraudulent transfers are based on the idea that, once you have incurred a legitimate debt, the property needed to satisfy that debt constructively belongs to the creditor. If you try to get rid of it, so the creditor cannot be paid, you have made fraudulent transfer. 7

8 How to Transfer Your Assets the Right Way The way to avoid fraudulent transfers is to have an asset protection plan in place before you need the protection. This means, before you apply for Medicaid benefits. When your assets are protected correctly, creditors (including Medicaid) will have a difficult time establishing a fraudulent transfer occurred..avoid the Appearance of Fraud There are certain types of property transactions that courts typically see as fraudulent. Avoiding these kinds of transactions can go a long way toward avoiding a finding of a fraudulent transfer: 8

9 A transfer or obligation made to an insider (close relative or friend) Retaining possession or control of the transferred property, even after the transfer A transfer of substantially all the debtor's assets Concealment of assets Being insolvent or becoming insolvent shortly after the transfer is made A transfer occurring shortly before or shortly after a substantial debt is incurred We all have a right to establish an asset protection plan, and to transfer our assets as we see fit. Though creditors may be quick to suggest that a transfer of assets is fraudulent, if you create a proper asset protection plan ahead of time, you should not have anything to worry about, when it comes time to submit that Medicaid application. If you have questions regarding fraudulent transfers, or any other Medicaid planning needs, please contact the Schomer Law Group either online or by calling us at (301)

10 About the Author Scott P. Schomer is a graduate of Boston University School of Law and is a frequent lecturer on estate planning and elder law issues, having appeared on local and national television discussing the importance of estate planning. Scott has an extensive litigation background and has over the years obtained in excess of twenty five million dollars in judgments and verdicts for his clients. Scott is a member of the Probate Volunteer Panel and has been appointed by the Los Angeles Superior Court to represent numerous parties in contested proceedings in the probate court. Scott has also served as Judge Pro Tempore of the Los Angeles Municipal Court and also been appointed by the court as an expert in probate matters. Because of his extensive experience, Scott brings a unique perspective to helping protect his clients. SCHOMER LAW GROUP Schomer Law Group is a professional law corporation that specializes in elder law, probate, wills, trusts and conservatorships. We counsel clients on the unique legal issues relating to advancing age. Whenever possible, we prefer to help clients plan for the future, avoid probate, minimize taxes and solidify their legacy. We also help clients plan for possible incapacity and long-term care. We help our clients deal with issues of aging with independence and dignity. In addition to estate planning, our firm has considerable experience helping victims of elder abuse. Our firm has aggressively pursued remedies and recovered assets belonging to our elderly clients where unscrupulous individuals have taken advantage of the elderly because of diminished capacity or other impairments South Sepulveda Blvd, Ste 107 Los Angeles, CA Phone: (310) Website: 10