Can Sister Transfer “Nest Egg” to Protect it from Medicaid Spend Down?

 In Long-Term Care Planning
Medicaid transfer penalty

Photo by Nareeta Martin on Unsplash


Suppose a sibling living in New York State is in need of long-term care. She wants and become Medicaid eligible, so she is planning to transfer her cash assets to her younger sister, believing that by doing so, she will protect some of the “nest egg” of money that she earned over a period of 35 years, and that her long-term care would be paid for by the state. Is this transfer possible and is it legal?


No, unless her sister is disabled. Medicaid is a health care program for the poor. Congress did not want people to artificially render themselves impoverished by giving away their assets, so it imposed a transfer penalty for doing so. The actual penalty is calculated under a somewhat complicated formula, but anyone applying for Medicaid coverage must report any transfers they made during the prior five years. This is called the “look-back” period. Because of the way it works, it essentially means that any transfer can cause up to five years of ineligibility for benefits.

There are, however, some exceptions. For instance, your sister can transfer assets into trust for the sole benefit of an individual who is disabled and under the age of 65. There are also some planning techniques that are available in some states and not others. For instance, in some states, it’s possible to transfer assets into a pooled disability trust. And in some, there’s a technique that can protect about half your sister’s savings through a transfer and loan technique. To explore what may be available in New York, I recommend that she consult with a local elder law attorney. You can find one at

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