When applying for Medicaid in Wisconsin, particularly for long-term care services, one key concept to understand is divestment. Divestment refers to the transfer of assets for less than fair market value, such as gifting money or property to others, including family members, within a specific timeframe before applying for Medicaid. These transactions are closely scrutinized because Medicaid is a need-based program, and such transfers could be seen as an attempt to meet the program’s strict financial eligibility requirements.
In Wisconsin, the "look-back period" for Medicaid applications is 60 months (five years). During this time, all asset transfers are reviewed. If the state determines that divestment occurred, the applicant may face a penalty period during which they are ineligible for Medicaid coverage. This penalty period is calculated based on the value of the transferred assets and the average cost of nursing home care in the state.
Importantly, Wisconsin Medicaid does not allow general exceptions for gifting assets, even to children or other family members. Common misunderstandings arise from the belief that small or "reasonable" gifts, such as financial help to children or contributions for weddings or holidays, are permissible without penalty. However, under Medicaid rules, any transfer for less than fair market value can trigger penalties, regardless of intent or recipient unless it meets one of the very narrow and specific exceptions under the Medicaid rules.
The exceptions include the following:
• Transfers between spouses
• Transfers to a blind or disabled child
• Transfers to a trust for a disabled individual who is under age 65
• Transfer of the primary residence to a spouse, a child under 21, a child of any age who lives in the home and has provided care for at least 24 months prior to a nursing home admission or to a sibling who has an equity interest and has lived in the home for a least one year prior to nursing home admission.
• Transfer of an asset for full fair market value
• Transfers made with no intent to qualify for Medicaid
To avoid costly penalties, individuals should plan carefully and consult with an elder law attorney or Medicaid attorney. Proper planning can help protect assets while ensuring compliance with Wisconsin's Medicaid rules. Understanding and adhering to these regulations is essential to ensure a smooth application process and avoid delays or denials of much-needed benefits.
If you have questions regarding divestments or Medicaid qualifications please make an appointment with one of our skilled elder law attorneys.