The Deficit Reduction Act of 2005, signed into law by President George W. Bush on February 8, 2006, has a profound effect on the transfer of assets made to parties other than one's spouse as related to Medicaid planning. The following is a summary of the new transfer provisions. 1. The look-back period for transfers to parties other than one's spouse has been increased from 3 years to 5 years, for transfers made on or after February 8, 2006.  2. If an applicant or the applicant's spouse transfers assets on or after February 8, 2006, within the 5 year look-back period, either or both will be ineligible for Medicaid for a period of time beginning on the first day of a month during which or after which assets have been transferred, or  the date on which the individual is eligible for medical assistance and would otherwise be receiving Medicaid, whichever date is later. In other words, the period of disqualification for Medicaid for any transfers made on or after February 8, 2006, will produce a prospective penalty period looking forward from when one applies for Medicaid, unless 5 years have elapsed. 3. The states can combine gifts given over several months and calculate the penalty period on the total amount. States will no longer be allowed to round down the penalty period to the lowest whole number. Instead, the fraction will be equated and applied, creating partial month penalty periods. 4. Until the State ofFlorida applies the new Federal legislation, it is unclear if there is a minimum monthly gift amount allowable per month. Until Florida's rules are amended to reflect the Federal legislation, there can be no assumption of minimally allowable transfers (gifts) to third parties.  Exceptions to the Transfer Penalty Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility.  These exempt recipients include: 1.      A spouse (or anyone else for the spouse's sole benefit); 2.      A blind or disabled child (or anyone else for the child's sole benefit); 3.      A trust for the benefit of a blind or disabled child; or 4.      A  trust for the benefit of a disabled individual under age 65. However, special rules apply with respect to the transfer of a home.  In addition to being able to make the transfers without penalty to one's spouse or a blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to: 1.         A child under age 21; 2.         A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home; or 3.         A "caretaker" child who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home. 4.         A blind or permanently disabled adult child. Other Important Effects of the Deficit Reduction Act of 2005 1.         Unless an applicant has a spouse, or child under age 21, blind or disabled lawfully residing in the home, the applicant's equity cannot exceed $500,000, with an option by the state to increase the allowance to $750,000. 2.         If an applicant is a resident of a continuing care facility, any refundable portion of the entrance fee is considered an available asset. The developing situation requires careful attention and guidance. It is highly advisable to seek a well qualifed elder law attorney  during these changing times.         Mark W. Mazzeo is a Member of the National Academy of Elder Law Attorneys.