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Gifts to Disabled Persons

by Ira M. Leff, Esq.

March 9, 2010

In the past, I have written several articles about transfers to trusts for disabled children of Medicaid applicants. According to the Georgia Medicaid Manual, no transfer penalty applies if assets are transferred to a trust for the sole benefit of a disabled child. MEDICAID MANUAL § 2342-3. As you may recall, I appealed a case where Medicaid argued that the recipient trust had to be a special needs trust in order for the transfer to be exempt from the transfer penalty. The Department of Community Health ultimately agreed that I was correct, that any trust for the sole benefit of a disabled child can receive gifts without a transfer penalty. I recently attended an Elder Law seminar and found an answer to a question that always troubled me: Why are transfers to trusts for disabled persons not penalized but outright transfers are in Georgia? The federal law on transfers to disabled persons, from which Georgia derived MEDICAID MANUAL § 2342-3 says: An individual shall not be ineligible for medical assistance ... to the extent that ...the assets were transferred to, or to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of the individual's child described in subparagraph (A)(ii)(II). 42 USC § 1396p(c)(2)(B)(iii). Georgia, apparently, found the federal law awkward as written so it eliminated the phrase to, or to ... In so doing, Georgia created a rule which makes no logical sense, and which is not in compliance with federal law. If the correct statement of the law is that a Medicaid applicant/recipient can transfer assets to a disabled child, or to a trust established solely for that child, then it makes sense that it does not matter what kind of trust the recipient is, and we no longer have the question of why a transfer to a trust works but an individual transfer does not. I intend to send a copy of this Elder Law Minute to Ginger Henry at DHR and ask her to reconsider the language in MEDICAID MANUAL § 2342-3.

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