Mabel’s children were concerned that Mabel would need long-term nursing home care in the near future. They knew she had few assets and would need Medicaid to pay for her care. It was the holidays, and Mabel always enjoyed being generous with her family. But her children had heard that people in her circumstances should not give gifts.
The concern is real. In order to qualify for Medicaid, Mabel will need to be able to show that she owns no more than $2,000. She must also be able to show that she has not given away any money or assets during the last five years (known as the “look-back period.”). If she has given away money or assets during that time, she will be assessed a penalty period based on the amount of money given away. Depending on the size and number of the gifts, the penalty could be substantial.
Medicaid law vs. Tax law
Many wrongly think that there is no penalty for gifts of up to around $15,000 annually. That misunderstanding confuses tax law with Medicaid law (and it also misstates tax law, but that’s another subject). The Medicaid rules are entirely different from the tax rules. In the Medicaid context, gifts of any amount that are given during the look-back period can be penalized.
There are exceptions. These include gifts to spouses and siblings under certain circumstances, disabled children, and children who are caregivers and who live at home with the elder for a span of time. But overall, gifts and Medicaid do not go together. The Medicaid rules are complicated and the consequences for mistakes can be very costly. There are a number of options to protect assets and still qualify for benefits, but these options must be weighed with great care.
If we can help you assess your ability to qualify for Medicaid, please set a consultation appointment. We look forward to working with your family.