My mom will be going into nursing home later this year. Can she gift me $12,000 and still be eligible for Medicare once her own money runs out
Absolutely not. Just because a gift is not taxable does not mean it is OK as far as Medicaid goes. Your Mother would have an uncompensated transfer which would create a penalty period where she would be ineligible for benefits. You should consult an attorney in your area who understands Medicaid and see how you might protect your Mother's eligibility and her assets at the same time.
Elder Law Attorney
No. So many of my clients confuse the $12,000 annual gift to Medicaid planning. That gift is related to Estate and Gift tax planning. And, so many of my clients confuse Medicaid with Medicare.
Since your state's implementation of the federal Deficit Reduction Act, your mother will not be eligible for Medicaid if she made ANY gifts the previous five years before her Medicaid application. If she made any gifts, the gifts have to be paid back before she can be eligible. Sorry about the bad news.
With your mother's co-pay, Medicare pays for her care up to 100 days or when she "levels off", that is, is no longer progressing. Families are often surprised when Medicare stops after two weeks, for example. When Medicare ends (which your mother can appeal the end date), your mother will have to pay for private pay at the nursing home or apply for Medicaid. Once she qualifies for Medicaid, all of her skilled nursing home care will be paid by the state.
I strongly urge you to speak to an attorney in your geographical area who specializes in this area of the law.
Elder Law Attorney
I believe you mean Medicaid, not Medicare. Gifting would have no effect on Medicare benefits, which is a health insurance program that your mother paid for through payroll deductions.
Medicaid is a medical assistance program for needy (insert "poor") individuals. Uncompensated transfers (gifts but also more) cause an individual to be inelgigible for Medicaid benefits for a period of time. The length of time often depends upon your state's Medicaid divisor number, which is based upon the cost of a nursing home room in your state or in your region of the state.
Under the new rules governing the Medicaid program (new since February 2006), a penalty period, or period of inelgibility for Medicaid, begins when the applicant is eligible for medical assistance under the state plan and would otherwise be receiving long term care services (for instance nursing home care) but for the application of the penalty period. So, if your mom gave $12,000 this year, the penalty period that would result from that gift would not even begin until your mother had practically no money, applied for Medicaid, and required nursing home services.
the lookback period is now five years, so the penalty period would be a possibility for the next five years. How long would the penalty period? In NJ, it would be about 1 and a half months for a $12,000 gift. So, how much does a nursing home cost in GA? The $12,000 gift may cost you more than it's worth.
Don't ever gift without consulting with a local attorney who is a certified elder law attorney. Medicaid is extremely complex.
Elder Law Attorney
You cannot. This issue demonstrated the divergence of different laws.
You are confusing a gift that does not require a gift tax return and an uncompensated transfer for Medicaid purposes. Understand that the tax laws and Medicaid laws are independent of each other. Often, the laws are at odds. The same transaction can be good for one law and bad for the other.
To clarify thism the IRS does not require the filing of a gift tax return if the gift is under $13,000 in 2010. It is still a gift.
Medicaid terminology for this is "uncompensated transfer." This means the individual receives nothing in return for the transfer. In your question, the $12,000 is non-reportable gift for tax purposes but it is an uncompensated transfer for Medicaid purposes.
An individual can go to a casino and put all of their money on red on the roulette wheel and lose it all. That would not be an uncompensated transfer. However, if she gave it to you and you put on red, the act of giving you the money is an uncompensated transfer.
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