By Paul Lorah
We all enjoy giving gifts to our loved ones, however, as with most of us, someday you may need to apply for Medicaid benefits to help with long term care costs. Because of this you need to be cautious, giving away money or property can affect your eligibility.
Under federal Medicaid law if you transfer (or "gift") certain assets within 60 months of applying for Medicaid you will be ineligible for a period of time (called a transfer penalty), the length of the penalty will depend upon how much money you transferred. Even small transfers can affect eligibility. While IRS "Gift Tax" laws allow individuals to gift up to $14,000 a year (in 2016) without having to pay taxes, Medicaid law still treats that as a transfer.
Any transfer that you make, however innocent, will come under scrutiny. For example, Medicaid does not have an exception for gifts to charities. If you give money to a charity, it may affect your Medicaid eligibility. Similarly, gifts for holidays, weddings, birthdays, and graduations can all cause a transfer penalty. If you buy something for a friend or relative, this could also result in a transfer penalty.
If you suddenly spend a lot of cash all at once it could prompt the state to request documentation showing how the money was spent [depending upon the amounts]. If you don't have documentation showing that you received fair market value in return for a transferred asset, you could be subject to a transfer penalty.
While most transfers are penalized, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:
- your spouse
- your child who is blind or permanently disabled
- a trust for the sole benefit of anyone under age 65 who is permanently disabled
In addition, you may transfer your home to the following individuals (as well as to those listed above):
- your child who is under age 21
- your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay at home during that time
- a sibling who already has an equity interest in the house and who lived there for at least a year before you moved to a nursing home.
The suggested rule? Before giving away assets or property or if you have in the past, contact us to help ensure that it won't affect your Medicaid eligibility.