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Utilizing the "Disabled Child" Exception to the 5-Year Look-Back Rule

It is fairly well-known that any person over the age of 60 years old may face a penalty if the person applies for Medicaid within 5 years of making a gift. There is an important exception to this general rule that allows for transfers of real estate or property to a disabled child to take place without incurring such a penalty. “Disabled” for Medicaid purposes means the person is disabled within the meaning of the Social Security Act, and thus applies to children who have previously been deemed disabled for purposes of SSDI. The disability award must have taken place prior to the date of the gift. Such gifting strategy requires careful planning, since the disabled child may be receiving benefits that are income and asset-based. Thus, in many situations, the preparation and approval of a special needs trust is required to protect the benefits currently being received by the disabled child. Nonetheless, this is a powerful exception that many families should seek to take advantage of.

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