Medicaid Laws Allow the Transfer of Assets to a Disabled Individual

father smiling with disabled grandson

An individual who requires long-term care will be eligible for Medicaid if the assets are spent down to less than $2,000.  There are both federal and state Medicaid laws, however, that prevent a person from gifting assets to family members in order to qualify for Medicaid.  There is an important exception to these gifting laws for a person who has a disabled child of any age.

According to federal law, a parent can transfer unlimited assets to a son or daughter who is disabled. 

According to 42 U.S.C. §1396p (c) (2) (A) (ii), a parent can legally transfer all of his or her assets to a child of any age who is disabled. Our New Jersey Medicaid regulations also mirror the applicable federal statute.  According to the New Jersey Medicaid regulations, a parent can transfer all or a portion of the assets to a child of any age as long as that child is either blind or “permanently and totally disabled”.  There is another New Jersey Medicaid regulation that provides for a presumption that the son or daughter is disabled if he or she receives Social Security Disability benefits.

At one point the State of New Jersey tried to restrict this planning option for individuals.  The State of New Jersey argued that a parent could not transfer assets directly to the disabled son or daughter but had to put the money into a trust.  The Federal District Court for the District of New Jersey ruled that New Jersey’s interpretation of the law was not correct.  The Federal District Court determined that a parent can transfer assets directly to a son or daughter who is disabled.