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Once gifted for Medicaid eligibility (in 5 years), do I have a way to protect the property I gifted from being misappropriated?

Greenville, NC |

I plan to gift my property to my daughter to start the 5-year clock on Medicaid eligibility. I have NO reason to believe she cannot be trusted to maintain the property for my benefit but if there are mechanisms that can ensure protection of my property, I'd like to know.

I'm not interested in home exemptions, trusts, etc - I just want to know if making the gift is an absolute and final act and that, hypothetically, my daughter could do anything she wants to do with the property.

I have spent some time researching the subject and the gifting process seems to have no recourse if misappropriations begin to occur - from what I can read.

Of course I will be consulting with a certified elder law attorney soon, but this preliminary information would be greatly appreciated.

Attorney Answers 4


Unfortunately, if you give away property you cannot control what the person who receives the gift does with that property. A gift belongs to the person that the gift is given to and they can do whatever they want with the property. There are some alternatives to outright gifts that may be safer than simply giving away your property. The property can be placed in an irrevocable trust, which can be drafted with restrictions on the use of the property. Depending on the type of asset, you may be able to use a revocable life estate deed, which would allow you to maintain control over the property. Outright gifts have other disadvantages too. If the assets have appreciated in value since you've owned them, your daughter may have to pay capital gains tax on the property when she sells it. This is because she will have the same cost basis in the property that you have. However, if she inherits the property from you at your death, she will receive a "step-up" in the value to the current fair market value. In addition, by giving the assets to your daughter, you will expose the assets to her creditors. If she files for bankruptcy, goes through a divorce, gets into a car accident and has large medical bills, the assets that you gifted to her will now be subject to her creditors. I recommend that you speak with an elder law attorney before you make any gifts of your property so that you can make an informed decision.

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Putting aside the use of certain types of trusts, no, once you give away property it is gone. By definition, a gift consists of intent to make a gift plus delivery. Delivery can be incomplete but once it is complete it is done. The recipient is free to do whatever they like with it. That is the nature of ownership.

It is good that you are seeking counsel first for this plan, because it is an area fraught with misconceptions, schemes, misinformation, and serious potential consequences.

No legal representation exists by virtue of this answer. Consult your attorney. Licensed to practice law in Indiana and Illinois. Circular 230 Disclosure: any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.

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My colleagues have given you sound advice. I would add only the following:

You have told us that you "are not interested in home exemptions, trusts, etc..." My hope is that when you do go to an elder law attorney, you will keep an open mind regarding the options that the attorney presents to you. We do have ways to help people that even a well-researched layperson such as yourself may not know. That's why we are in business doing what we're doing.

The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Flood and Masiuk, LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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You have a great question. If the gift is outright and without any reservation of rights for you, it is a completed gift, and your daughter can do anything she wants (it is also subject to her creditors and risks of loss). If you have reserved rights, it may not be a completed gift (and might still be countable for the purposes of Medicaid qualification). I hope you will see the elder lawyer with whom you plan to consult sooner rather than later. The earlier this trusted advisor is in the loop, the better for you. You should do nothing involving the transfer of assets without first consulting with your attorney. Best of luck to you!

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