Change in Treatment of Tax Refunds for Medicaid and SSI Purposes

The extension of the Bush-era tax cuts this year included a little noticed provision that will impact those receiving or applying for Medicaid or SSI benefits. Under the law, tax refunds will not be considered countable income or a countable asset for up to twelve months from receipt of the refund. In other words, if an applicant can verify that part of the funds in his account are from a tax refund from the previous year, those funds will not be considered a countable asset, as long as the funds are spent within twelve months of receiving the refund. This new law applies to any refunds received after December 31, 2009. In addition, according to the new law, should an applicant seeking Medicaid nursing home benefits transfer all or part of the tax refund to a trust within twelve months of receiving the refund, this transfer will not be penalized by Medicaid.

For example, under the prior law if a Medicaid recipient residing in a nursing home received a tax refund, they would have to spend these funds down quickly either by paying the refund to the nursing home or perhaps prepaying for their funeral. If the Medicaid recipient received an $8,000 tax refund and then in turn transferred these funds to a trust they would have made themselves ineligible for one month of benefits. Under the new law, the nursing home resident has twelve months to spend down the funds and they are not penalized for transferring the funds to a trust.

Let us know if you have any questions or comments. For more information, please visit our website, www.cohenoalican.com

Upcoming speaking events: Steve will be giving an all day seminar on June 20th on Long-Term Care Planning and Medicaid, through the Boston Tax Institute. This program is open to the public and is eligible for CLE's to Social Workers and Nursing Home Administrators.

Regards,

Steve & Eric