Gifts and Medicaid
Everyone likes receiving gifts, and the birthday card or holiday card filled with money is definitely a lot of people’s favorite gift. While we might enjoy seeing the looks of joy on the faces of our loved ones, we need to be careful in giving away our money if we think we may one day wish to apply for Medicaid. This is because giving away your money can, in fact, affect your eligibility to receive benefits.
According to federal Medicaid law you will be ineligible for a period of time if you transfer certain assets within five years before applying to receive benefits. This period of time is known as a “look back period” and it can trigger a transfer penalty. This transfer penalty is dependent upon how much money you have transferred. Keep in mind that even smaller transfers can affect your eligibility. While Medicaid allows someone to transfer up to $14,000 a year (as of 2015) without having to worry about paying a gift tax, Medicaid doesstill treat that gift as a transfer.
Another thing to keep in mind is that any transfer you make, however innocent it may be, will be put under a microscope by Medicaid. For instance, they don’t have an exception for gifts to charities, so if you plan on giving money to a charity, keep in mind that it could affect your Medicaid eligibility later on. In the same way, gifts for things like holidays, weddings, birthdays and graduations could all cause a transfer penalty. Even if you buy something for a friend or relative, doing that could result in a penalty.
If you spend a large amount of cash at one time or even over time, then that may prompt the state to ask for documentation that would show how was spent. If you sell an asset, and you do not have documentation that shows you received the fair market value in return for the asset you transferred or sold, you may be at risk for a transfer penalty. This rule would prevent someone from selling a valuable asset for “$1.00” to a family member or friend, in an effort to become Medicaid eligible.
While it’s true that most transfers are indeed penalized, there are some which are exempt. Even when you’ve gone into a nursing home, you can still transfer assets to the following people without having to go through a period of Medicaid ineligibility:
- Your spouse
- Your child who is blind or permanently disabled
- A trust for the sole benefit of anyone under the age of 65 who is permanently disabled
Also, you can transfer your home to the following people (as well as those individuals listed above):
- Your child who is under the age of 21
- Your child who has lived in your house for a period of at least two years before you moved into a nursing home and who helped provide you with care that enabled you to stay home during that time.
- A sibling who already has an equity interest in your house and has lived there for at least a year before you moved into a nursing home
As a rule, you’ll want to check with your elder law attorney before you start giving away any assets or property to make sure it won’t interfere with your Medicaid eligibility.