Gifting and Medicaid
We often see clients who believed this to be true, and thinking that they were doing the prudent thing did exactly this sort of gifting, resulting in long periods of ineligibility when the time came to apply for Medicaid. To begin with, what your friend is likely referring to is the $14,000.00 gift exemption under the Internal Revenue Code. Under the Code, all gifts made in any given year are subject to a gift tax. However, the first $14,000.00 gifted to each individual in any given year is exempted from the gift tax, and for that reason, for many individuals, gifting during lifetime is a way to distribute wealth and reduce their taxable estate at death.
Medicaid EligibilityOftentimes, seniors and their children believe that this same exemption holds true for Medicaid eligibility, and that gifting this amount of money away annually will not affect them should they need to apply for Medicaid benefits in the future. Medicaid requires that all Medicaid applicants account for all gifts and transfers made in the five years prior to applying for Institutional Medicaid. These gifts are totaled, and for each approximately $12,633.00 that was gifted, one month of Medicaid ineligibility is imposed. It is also important to note that the ineligibility begins to run on the day that the applicant enters the nursing home rather than on the day that the gift was made.
For example, if your mother had taken the advice of her friend, and gifted each of you $14,000.00 per year for three years, she would have given virtually all of her money away. If at the end of those three years she then needed Medicaid, those gifts would be considered transfers "not for value" and would have made her ineligible for Medicaid benefits for approximately thirteen months.
OptionsWhat makes this even more difficult for some families is that an inability to give the money back or help mom pay for her care is not taken into consideration, causing many families great hardship. It is important for families who have done this sort of gifting to know that there are still options available to them. An Elder Law attorney who concentrates their practice in Medicaid and Estate planning can help to you to optimize your chances of qualifying for Medicaid while still preserving the greatest amount of assets.