Navigating Medicaid options can be overwhelming—especially when asset transfers or prior
gifts are involved. The process often requires attention to both legal nuance and extensive
paperwork. This guide offers a concise overview of Medicaid eligibility in New Jersey for single
individuals over age 65 who require long-term care services and supports.
Medical Eligibility
Applicants must demonstrate a need for a nursing home level of care, which can be established in
one of two ways:
Physical Need: Assistance is required with at least three or more activities of daily living
(ADLs), such as:
- Bathing
- Dressing
- Toileting
- Transfers
- Eating
- Bed mobility
- Locomotion
Cognitive Need: Cognitive impairments—such as those resulting from dementia—must require
supervision or cueing with three or more ADLs.
Who Determines Medical Need? The process for establishing medical eligibility depends on
where the applicant lives:
- Nursing Home & Assisted Living Residents: The facility must request a Pre-
Admission Screening (PAS). - Community Residents: The applicant—or someone acting on their behalf—must contact
the Aging and Disability Resource Connection (ADRC). Also known as the Area
Agency on Aging, County Office on Aging, or Senior Services, the ADRC serves as a
central point for accessing long-term care services and initiating eligibility assessments.
Financial Eligibility
Financial eligibility includes two critical components: income and resources.
Income Limits (2025): The monthly income limit for a single applicant is $2,901, including
Social Security, pensions, annuities, and other income sources. Applicants who exceed this
income limit may still qualify by establishing a QIT (or Miller Trust). This legal tool allows
excess income to be redirected to cover care-related costs. Funds may be used for:
- Facility cost-share
- A small personal needs allowance
- Supplemental health insurance premiums
- Uncovered medical expenses
Countable Resources: Single applicants are permitted to retain no more than $2,000 in
countable assets. These include bank accounts, investments, cash, certain life insurance policies,
and some real estate. However, some assets—such as a primary residence (within equity limits)
and personal belongings—are excluded from this calculation.
Medicaid Penalties for Asset Transfers
Another critical factor to consider is Medicaid’s rules on asset transfers. Medicaid imposes
penalties on transfers made within five years prior to applying for benefits—known as the
“look-back period.” The presumption is that any gift or transfer of assets during this timeframe
was made for the purpose of becoming eligible for Medicaid, and the burden is on the applicant
to prove otherwise.
When a gift or unverified transfer is discovered, a penalty period is assessed. The penalty is
calculated by dividing the total value of the transfer by the daily divisor rate, which in New
Jersey is $402.74 per day (as of April 1, 2025). The result is the number of days the applicant
will be ineligible for Medicaid long-term care services.
Examples
- If an applicant reimburses a child $1,000 for a new water heater they purchased for
applicant’s home, but the applicant cannot provide documentation proving it was a
necessary purchase made for their benefit, Medicaid will treat the $1,000 as a gift. This
results in a penalty of approximately two days of ineligibility ($1,000 ÷ $402.74). - A more serious example involves using the applicant’s funds to add an in-law suite to a
child’s home. Even if the intent is for the applicant to live there, Medicaid views this as a
transfer for less than fair market value, since it enhances the child’s property value.
The penalty will be based on the full cost of the addition—often tens of thousands of
dollars—resulting in a penalty period lasting many months.
During the penalty period, Medicaid will not pay for long-term care services. This does not
necessarily mean the applicant must leave a facility, but it does mean that the cost of care
must be paid out-of-pocket.
Because an applicant can have no more than $2,000 in countable assets to qualify for Medicaid,
they typically do not have the funds to cover this gap. As a result, the facility may seek payment
from the individual who received the benefit of the transfer or from other responsible parties.
Bottom line: Penalties can impose a serious financial burden on the family if not addressed in
advance through proper planning and documentation.
Final Thoughts
Medicaid is a vital safety net for older adults needing long-term care, but eligibility is complex
and demands both medical and financial planning. Partnering with an experienced elder law
attorney helps ensure the process is handled correctly from the start—minimizing risks, delays,
and burdens on the family.