Simple Vehicle Transactions That Create Big Medicaid Problems
Today we are going to take a look at another type of “hidden gift.” We previously looked at hidden gifts involved in transactions with a Texas nursing home Medicaid applicant’s homestead or house. Today we are going to look at transactions involving a Medicaid applicant’s car or vehicle.
For those of you visiting us for the first time, I use the term “hidden gift” to refer to transactions which may not appear like a gift that creates a Texas nursing home Medicaid penalty because of some technicality, when the reality is the HHSC looks past the technicalities and discovers these attempts at hiding a transfer of assets. And once discovered, a costly penalty can follow.
Example 1 – The Medicaid Applicant Buys a Car
When your parent applies for nursing home Medicaid in Houston or anywhere in Texas, the past five years of their financial transactions are subject to review. If during those last five years, your parent purchased a car or vehicle and put anybody else’s name on the title to the vehicle other than their spouse you may have a Medicaid gift penalty to deal with.
You may be surprised at that because after all, the Medicaid applicant is still an owner of the vehicle so how can it be a transfer that creates a Medicaid penalty? It is correct that the Medicaid applicant is still an owner, but they are not the only owner and that is the reasoning for the HHSC to impose a Medicaid penalty.
In order to determine the value of the transfer, the HHSC regulations provide that if a nursing home Medicaid applicant paid for a vehicle and titles ownership to the vehicle in his/her name and someone else’s name then the entire purchase price is a transfer of assets for Medicaid eligibility and will result in a penalty period based on the full purchase price. So if your parent paid $25,000 to buy a vehicle that has both of your names on it, the HHSC says your parent made a gift of $25,000. This gift will result in Medicaid ineligibility for more than 105 days (using 2023 figures) that you will have to find another way to pay the nursing home bill.
Example 2 – The Medicaid Applicant Paid Part of Purchase Price
The outcome is a little bit different if your parent only contributed a portion of the purchase price of the vehicle. Let’s say you paid $5,000 towards the purchase price of the vehicle and your parent paid $20,000 towards the purchase price of the vehicle that is in both of your names. In that scenario, the HHSC says the amount of the transfer is $20,000. This would result in 84 days of Medicaid ineligibility (based on 2023 figures) where you would need another plan to pay the nursing home bill.
Why the Surprise Penalty is a Problem
You may have read the word ‘penalty’ earlier in this post without a second thought. I want you now to spend a moment visualizing what a Medicaid penalty could mean in your case. I assure you, although any given transaction may seem insignificant to you, the HHSC takes every single penalty extremely serious, and they enforce them with no sympathy.
Every day your parent has a penalty is a day you have to find a way to pay the nursing home or risk a discharge scenario. You’re under enough stress already, who needs discharge threats on top of an already difficult situation?
How to Fix the Mess Without Making it Worse
Are you dealing with a vehicle transaction which is impacting your parent’s nursing home eligibility? Don’t fear—there may still be hope. If other assets remain, we can assist in resolving this problem before it spirals out of control; however, if all the assets have already been used up and the problem isn’t addressed soon enough then your hands could be tied in a very bad situation. Schedule a free strategy call to fix your problems.
Want To Learn Medicaid Secrets?
I’d like to know from you: are you interested in learning Medicaid secrets that can help you protect assets and get through the government red tape? Have you been looking for answers and just can’t find anything you can use?
Let me know your thoughts on this by leaving a comment below. I do read them all.
And of course, if there are other topics you think I should discuss , please let me know!
Hi, thank you for this article. I am not in TX, but I have a question. Is TX that considered the amount of contribution when determining the share of ownership??? This article seems to suggest that it doesn’t.
Here is a quote from the HHSC on how they handle jointly owned vehicles purchased with a Medicaid applicant’s funds.
When someone uses an applicant’s money to purchase a vehicle, and the title is placed in both the applicant’s name and the other person’s name, consider the entire purchase price of the vehicle as a transfer, because when the applicant’s money was used to purchase a vehicle with the applicant and the other person as owners, the applicant’s ownership or control of the asset was reduced or limited.
(this is me again)
Joint ownership of a vehicle is survivorship, not tenants in common. So there is no need to determine the share of ownership, the entire amount of the Medicaid applicant’s funds is subject to penalty.
Thank you again for the fast response. Please allow me to ask one more question. If the co-owned car is the only car that the Medicaid applicant has, would be considered exempt asset (which should be non-countable) or a gift (which can cause a period of ineligibility)?
In Texas, be prepared for gift treatment. The vehicle would be exempt if solely owned by the Medicaid applicant. The fact that the applicant still owns some interest in the asset does not negate the previous gift because they still own less than 100%.
I would tackle this from a different angle. What is the need for the title to be joint? If it is solely for asset protection reasons, there are simpler options in Texas that do not trigger the complications a joint vehicle title brings.
My Dad has Alzheimer. I have POA over him. Can I purchase a vehicle in his name and pay cash for it. Will he be penalized for paying the full amount of the vehicle if he has to go in a home in the next year? We are in Lockhart, TX
If the vehicle is in his name alone and he pays fair market value for the vehicle I do not see a penalty issue there right now, however I can’t say definitively without having all the facts. The HHSC has been getting a little more aggressive on expenditures and purchases which the person never benefits from so that could change in the future.
If he pays more than fair market value or the vehicle has someone else’s name on the title as well as his, then you are running into penalty scenarios. Preserve your evidence in case you need it during the Medicaid application later.
What if the medicaid recipient wins a car and pays to upgrade it and he and the spouse already own cars will this affect their medicaid renewal?
A third vehicle is certainly going to be part of the asset evaluation for a renewal. You can always exclude 1 car, sometimes 2 in specific scenarios, but the regulations have no provision to exclude a third car. What the impact will be depends on their SPRA and their other assets. You should review the situation with the attorney who handled the initial application.
Brother already has Medicaid and wants to transfer truck over to me his sister wife just passed
Depending on the details of the title and his benefit case a transfer of the vehicle is likely to raise Medicaid transfer issues. The attorney who handled his application should have addressed the best way to preserve flexibility in transferring title.
I suggest having someone review the details of the current situation to evaluate any remaining options, but at this late stage some options he previously had may no longer exist. For example, if I was providing representation in this case earlier I could have created a path to complete the transfer without a penalty, but the specific strategy I have in mind disappeared with his wife’s death.
My mother recently experienced an accident that resulted in a traumatic brain injury. Her husband, my step-father, left her a few months after the accident, stating that it was more than he could handle. She had just gotten out of a nursing home facility and transferred home, along with home health care. They had just bought a new car, however, not the best one in my opinion as it is a car and not a smaller sized SUV that she could easily get in. Now that he has divorced her I see no other option than to place her in a nursing home, as I cannot stay with her. My question is, in order to “spend down” a rather large nest egg would it be permissible for me to purchase a midsize SUV in order to transfer her to the countless medical appointments she now has. I just feel that this would be much easier for her to step into and out of than her current car, again which was recently purchased with a fair trade price of roughly 22K. The vehicle would remain in her name only, so I might need to consider talking to her insurance agent about coverage while I am driving it.
There are usually better alternatives than vehicles purchases in most cases I work on. Without knowing more details of her situation I can’t say if those alternatives are available in your case.
I’m also not clear on if she was awarded the car you mention in the divorce, which would mean you are asking about a second car. If you are asking about a second car, the vehicle with the lesser equity would count towards her $2,000 asset limit and may present its own problems in that context.
If your goal is nursing home Medicaid, it is usually a good idea to have experienced advice before undertaking transactions with someone else’s money that may trigger unintended consequences.
The car was awarded in the divorce, there is no second car. Thank you for your advice.
12 year ago Granddaughter transferred title of a car she owned outright to Grandma and Grandpa. They needed transportation and granddaughter had two cars. No money exchanged hands. Nothing was in writing. 3 years after that, grandparents used that car from granddaughter as down payment on another car with only their names on title, with understanding that one day original car from granddaughter would be repaid if grandparents were able. Currently, grandmother has suffered stroke, and grandfather has dementia. The car that grandparent bought using granddaughters car as down payment is their only car and neither will be able to drive again. As POA holder, and their daughter, can I transfer the title to the granddaughter for repayment of the original deal 12 years ago? Or will this hurt “pending Medicaid” application for my mother? We have proof the car used as a trade in came from the granddaughter.
If you transfer an asset for less than fair market value you always trigger the penalty analysis. The only way to avoid a penalty in those situations is to find a specific exception or overcome the penalty presumption by the evidence available. While I cannot give advice on a case I am not working on, I am not sure the evidence you describe would be sufficient to overcome the penalty issues. There may be other ways to achieve your goals, but without all the information on the case it is impossible to say.
My father is a Medicaid recipient in the nursing home, and my mother has continued to make car payments on his vehicle, as well as her own. Both of their names are on the financial paperwork of his vehicle. Would there be a penalty if she traded both cars in on a less expensive one to help lower her monthly costs?
I would need to see the documentation to comment, however after one spouse is approved for Medicaid it is generally advised that the Medicaid spouse’s name is removed from assets the at home spouse is keeping. If he is still in his first year of Medicaid I would explore that option first.
I am a long term care patient of medicaid, and my mother gave me her car in 2016. The car is not working great, so my sister is gifting her car, and either wants me to sell the car and give the money to my mother who needs it or give her the car back so she can sell it. I’m not sure how it is best to handle this since it was her car
You did the right thing by taking a pause to avoid any negative consequences to your eligibility. Any transfer you make as a Medicaid recipient for less than fair market value can trigger a Medicaid eligibility penalty and cost you benefits and hassle.
From what I understand the car is currently in your name and the options you have are 1) give the sale proceeds to your mother or 2) give the car to your mother. Either transaction would create a penalty issue, the severity of which depends on the value involved. There might be some other strategies available to reach the same result without running into the gift/penalty issue, but that would require further analysis.
Hi-
My Elder (single Mother in Law) is entering late stage dementia. As my wife and I put her on the spend down for medicaid qualification, we had her only car sold. The asset was sold to a private buyer in the fair market value range (per Kelly Blue Book). The Bill of Sale we generated is a vanilla Texas Bill of Sale form, that shows the buyer, seller, amount paid, car info and mileage. My question – is looking forward to the lookback, will this Bill of Sale form stand for appropriate proof that the asset is no longer hers and was not let go below fair market; or must the bill of sale be notarized? I know Texas does not require notary for vehicle title transfers, but I don’t want to be down the path in 6-8 months and incurring a penalty because the documentation of the sale is insufficient. Thank you very much for your assistance!
I’ve never had the HHSC require the sale documents be notarized as long as they are otherwise valid and the transaction is actually completed.
My aunt cosigned for my truck in 2010. She is the primary and I am the co-signer. I paid all payments and down payments for the truck. Now she is in ill health and the truck is finally paid off. My sister has power of attorney over my aunt’s estate and life now. My sister is claiming signing the title over to me completely will mess up my Aunt’s **correction** Medicaid **? And that she can take the truck and sell it and there is nothing I can do?
I’m not clear on your sister’s reasoning. Any transactions more than 5 years before applying for Medicaid are beyond the lookback period. It appears right now there is a dispute between the joint owners of the vehicle and the outcome to determine ownership would likely be determined in a civil court. The HHSC would likely follow the court’s ruling on who title belongs to.
My mother-in-law is applying for Medicaid benefits. Her income and assets are both below the Medicaid thresholds. She has a car that is currently exempt from being counted as an asset. Let’s say she sells it and gets $4000 over what she owes on the car. Should I assume that this $4000 would then be counted as an asset, obviously putting her above the $2000 asset threshold?
You are correct. As you describe you are taking an exempt asset (one vehicle) and converting it to a non exempt asset (cash). Assets are snapshot on the 1st of each month so you would have until the end of the month when she sells the vehicle to get her back under the limit before the next snapshot.
My MIL had a car. We purchased a handicap van for her with our money and she was to take proceeds from sale of her to pay for van. It was $5k less than what we paid for van. She now is in nursing home (fell 3 days ago) and will need to apply for Medicaid. The van is in my husbands name (POA) because she did not have the money at the time and can’t drive anyway. Will the $14k transfer of her funds towards van be seen as gifted since it is not in her name. The plan was to transfer when paid in full and we have documentation supporting that
If she transfers $14,000 in cash and does not receive $14,000 of value in return then that is likely to be the basis of an eligibility penalty from the HHSC.
He is POA and document states she can reimburse for reasonable expense. She is wheelchair bound and unable to travel without van we purchased to transport her. I feel that is a reasonable expense. This system is insane
The issue is not the language in the power of attorney allowing reimbursement for expenses. The question I saw was how the HHSC would interpret the reimbursement transaction. The authority to conduct a transaction in a power of attorney and how the HHSC treats that transaction are two different issues.
If she received title to the van that was worth $14,000 or more then she received fair value for the cash.
If she pays $14,000 for periodic transportation without having title in her name it is my opinion the HHSC will conclude the value of periodic transportation is below $14,000 unless you have a preponderance of evidence showing the value of what she received equals or exceeds what she paid.
My mother lives in Florida and is under Medicaid. I want to buy her new car Honda civic. Will she become not eligible for Medicaid having new car?
Thank you for visiting us, but each state has their own rules and we are only licensed in Texas. The rules in Texas on this question may lead to a different outcome than the rules she is under in Florida.
Mr. Shea,
My mother purchased a new vehicle during a Medicaid spend down. She is now receiving Medicaid benefits. Are there strategies to transfer ownership of the vehicle to me without penalty?
Thank you.
We usually do not transfer ownership during a Medicaid applicant’s lifetime in order to avoid a penalty. If possible, we use the beneficiary designation to transfer ownership without probate upon their death.
We are looking at putting my mother in a nursing home. She currently has a vehicle that she purchased in 2015 it is paid off she wants to give the vehicle to my nephew. Will this penalize her in trying to get assistance through Medicaid
It will likely be evaluated for a potential Medicaid penalty by the HHSC. Depending on her other remaining resources available there may be options for reducing or eliminating the damage of any potential penalty but we have no details of those facts at this time.