Is one of the joys of the holiday season giving gifts to your children and grandchildren? As a senior adult, do you feel that you have so much and you enjoy the looks of delight on the faces of your children and grandchildren when they open their gifts from you? This holiday season, are you planning to give financial gifts? Although your gifts are well intentioned you may put yourself in danger if you need to apply for Medicaid in the next five years. Can gifts impact Medicaid eligibility? Yes, this can have an impact on both the giver and the receiver.
First, in regard to the gift giver, bear in mind that the IRS allows a tax-free annual gift of $16,000 per person this year with an unlimited amount of donees. In other words, a wealthy donor could gift away over a million tax free dollars per year by gifting a hundred different people the maximum sixteen thousand dollars.
Next, having discussed the tax laws about gifting, be aware, Medicaid takes a different stance on gifting in terms of Medicaid eligibility. When a person’s assets are reviewed for Medicaid eligibility, this includes a “Look-Back” period of 5 years or sixty months. If it is discovered that the Medicaid applicant has gifted money in order to be eligible for Medicaid, the penalty is Medicaid ineligibility. The length of time of ineligibility is determined by the amount of the gift and the average cost of a private pay nursing home in the area.
Now when a person is deemed ineligible for Medicaid due to gift giving, there may be some options. For example, it is possible for the gifter to collect the gift back, or reimbursement, in order to “un-do” the penalty. Another example, if possession of the money makes them ineligible for Medicaid, they can spend it down by temporarily paying for long-term care or making a home modification related to their disability until they reach eligibility status. Finally, there may also be a possibility of an undue hardship waiver, if Medicaid ineligibility will cause the person to go without medical care, food, or shelter.
Be mindful that there may also be important impacts on the gift receiver. All states have an asset limit to be Medicaid eligible and it is not very high. In fact, many states have limits falling in the range of $1,500 to $2,000. Be careful, even a small gift can push a Medicaid recipient over the eligibility limit. Any gift received must be spent within a month in order to avoid affecting Medicaid eligibility. There are some options a Medicaid recipient has if they receive a gift. They can pay off debt, purchase a funeral trust, or purchase a Medicaid eligible annuity. If money is received before applying for Medicaid, the money can also be spent down in a similar fashion.
If you will be giving or receiving money or other assets this holiday season and anticipate this may impact your Medicaid eligibility or someone else’s, contact our office to discuss your options. Our estate planning law firm takes a very different approach from what you might have come to expect. Our goal is to create lifelong relationships with each of our clients, to guide and manage your legacy for the rest of your life. Please contact our offices in Stuart and in Palm City to learn more.