Is Transferring Assets Against the Law?

You may have heard that transferring assets to achieve Medicaid eligibility is a crime. Is this true?

No. But what about a professional advising someone to engage in asset transfers for Medicaid planning? That is a crime, at least in the statute books. However, it has been ruled to be an unconstitutional violation of the First Amendment. Nevertheless, it remains on the books.

As part of a 1996 health care bill, Congress made it a crime to transfer assets for purposes of achieving Medicaid eligibility. Congress repealed the law as part of the 1997 Balanced Budget bill, but replaced it with a statute that made it a crime to advise or counsel someone for a fee regarding transferring assets for purposes of obtaining Medicaid.

This meant that although transferring assets was again legal, explaining the law to clients could have been a criminal act.
In 1998, then-Attorney General Janet Reno determined that the law was unconstitutional because it violated the First Amendment protection of free speech, and she told Congress that the Justice Department wouldn’t enforce the law. Subsequently, a U.S. District Court judge in New York said that the law could not be enforced for the same reason.
— See New York State Bar Association v. Reno (N.D.N.Y., No. 97-CV-1760, April 7, 1998).

Accordingly, the law remains on the books, but it will not likely be enforced. In theory, however, a federal prosecutor in any state other than New York could seek to enforce the law. Another attorney general could see things differently than Janet Reno did. RLF