Where a MassHelath applicant makes multiple disqualifying transfers during the five year look-back period, the MassHealth agency will add the value of all resources transferred and determine a single period of ineligibility, based on the amount transferred/avg. cost of care formula. This single period of ineligibility can offer some planning opportunities for applicants depending on their specific circumstances*.
Example: Abe and Betty are planning ahead. They’re 65 years old, own a home worth about $400,000, other investments and checking accounts worth about $100,000 and an IRA rollover worth $700,000. They want to reduce probate costs and estate tax exposure while protecting their assets from the costs associated with long term care, which they may need down the road.
To accomplish this, they could transfer their home to an irrevocable grantor income only trust, which would start the clock running on their five year look-back period. The following year, depending on their taxable income bracket, they could withdraw $60,000 from the IRA and transfer the money to the trust, following this procedure every year for the next five years.
These transfers would fall within the MassHealth regulations regarding multiple disqualifying transfers. Although each transfer would trigger its own period of ineligibility, only transfers that occur within the look-back period are counted. Therefore, after five years Abe and Betty’s house would be safe from the costs of long term care. Also, after each following year, a transfer of $60,000 from their IRA would fall outside the look-back period and also be protected. Depending on when they actually need to enter a nursing facility, this could be an affective approach for protecting their assets while not incurring additional income tax exposure.
This scenario is only offered as one example of effective MassHealth planning. Each person’s own circumstances are different and there are many considerations to take into account when deciding on a proper course of action. You should consult a Massachusetts estate planning attorney to discuss your personal options.
