By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Medicaid Attorney

In order to be eligible for Medicaid long term care, you cannot transfer your assets as gifts to family members, loved ones, friends or any organizations even if charitable in nature within 5 years of application. The state does not want you to move into a nursing home after you have given all of your money to your children (or whomever) and qualify for Medicaid soon afterwards. So it has imposed what is known as a “penalty” on people who transfer their assets without receiving fair value in return.

A “penalty period” is a calculated length of time during which a Medicaid applicant who transfers assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average cost of nursing home care in New Jersey.

Here’s an example of how it works: In New Jersey the average monthly cost of care (according to the state) is $9,369+. If you give away property worth $100,000, you will be ineligible for Medicaid benefits for 10 months ($100,000 ÷/ $9,369 = 10.67 months).

Restated, for every approximate $9,300+ transferred, a Medicaid applicant is ineligible for nursing home benefits for one (1) month. There is no limit on the number of months a person can be ineligible. Theoretically, the penalty period could be 10 years or more, but there are practical ways to prevent that from ever happening.

A person applying for Medicaid must disclose all of his or her financial dealings (income and expenses) within 5 years of filing an application. This 5 year period is frequently called the “look-back period.” Your County Board of Social Services then determines whether the applicant transferred any assets for less than fair market value during this period.

Under New Jersey Medicaid eligibility laws, the 5 year penalty period does not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to $2,000 ($3,000 for a couple) which is the asset limit for Medicaid eligibility, (3) has filed an application for Medicaid coverage, and (4) has been otherwise approved for Medicaid except for the gift.

Not All Transfers Are Penalizing

Transferring assets to certain beneficiaries will not trigger a period of Medicaid ineligibility. These exempt beneficiaries include the following:

  • A spouse
  • A blind or disabled child
  • A trust for the benefit of a blind or disabled child
  • A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home without incurring a transfer penalty to the following persons:

  • The applicant’s spouse
  • A child who is under the age of 21 or who is blind or disabled
  • A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Exemptions from penalties are highly restricted and subject to close review and examination by your County Board of Social Services, so be careful. Remember, my position on the state’s approach to applications… delay, frustrate and then deny.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at Please ask us about our video conferencing consultations if you are unable to come to our office.