What creates a Penalty under Medicaid?  That is one of the most frequently asked questions for an elder law attorney.  Penalties can  inadvertently be created by any number of elections made by  individuals during the estate planning process.  This may include gifting away of assets to children and the deeding of a home to a party other than one's spouse.   A penalty could be created if the medicaid applicant   irrevocably waives his or her  rights to income or an inheritance. A nursing home bound spouse who fails to file for a spousal elective share  upon the death of the community spouse can create a penalty period.   The refusal to take legal action to obtain a court ordered payment such as child support or alimony may create a penalty period.  There are many additional actions or inactions taken by the applicant that may create a penalty and deny the applicant Medicaid benefits.

There are also exceptions or special circumstances where transfers would not affect Medicaid eligibility.  There are a number of  permitted transfers that one can make, which would shield an individual from a potential medicaid penalty and the recapture of assets by Medicaid.   Experienced elder law attorneys utilize these exceptions to benefit their clients and pass along assets to the next generation, if this is the goal of the client and in his or her best interests.  

By way of example, acceptable transfers include