States may have the option to take advantage of a grace period before coming into compliance with the new asset-transfer law. That translates into a grace period for some elderly from the new asset-transfer rules.

Last week, the House passed the Deficit Reduction Act, which includes an extension on the look back period for transferring assets to qualify for Medicaid nursing home care to five years from three. It also includes a measure that changes the penalty date for improper asset transfers to coincide with a nursing home stay. The president is expected to sign the act into law.

If state legislation is required to put the new rules into effect, the elderly in most states will still have time to plan under the old rules. The old rules are likely to apply to transfers if the Medicaid application is filed before the state passes the complying legislation.

Also, states have until the first day of the first calendar quarter beginning after the end of the state legislature’s next session to comply. That means, for instance, if a state’s next legislative session begins in September 2006 and ends in Dec. 2006, the deadline is Jan. 1, 2007, but if the session ends in Jan. 2007, then the deadline will be April 1, 2007.