Do you enjoy this time of the year? Do you agree that it is “the most wonderful time of the year?” As you prepare to spend the holidays with your loved ones, are you cooking your favorite holiday recipes, decorating your home in holiday style and thinking about what gifts you want to purchase for your children and grandchildren? This holiday season are you wanting to give monetary gifts to your loved ones?  As a senior adult, are you aware that monetary gifts may impact Medicaid eligibility?  In fact, if you needed to apply for Medicaid in the next five years these gifts could have significant consequences, on both the giver and receiver.

As we continue and explain Medicaid and gifting, we also want you to be aware that by meeting as soon as possible with your California elder law attorney you can plan early for any need for Medicaid.

To begin, with respect to the gift giver, be aware that the IRS allows a tax-free annual gift per person with an unlimited amount of donees. However, this relates to tax law planning, not to Medicaid eligibility.

However, in regard to gifting, Medicaid takes a different stance. In applying for Medicaid eligibility, when a person’s assets are reviewed, there is a “Look-Back” period of sixty months, depending upon the state. If it is found that the Medicaid applicant gifted money, or made an uncompensated transfer in order to be eligible for Medicaid, the penalty may be 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.

Are there any options for the person deemed ineligible for Medicaid due to gift giving?  Possibly.  The gifter could collect the gift back, or reimbursement, in order to “undo” the penalty. Even if possession of the money makes the gifter ineligible for Medicaid, he or she can spend it down by temporarily paying for long-term care or making a home modification related to his or her disability until he or she reaches eligibility status. In addition, 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. Most importantly, we highly recommend meeting with a California elder law attorney for even more advice.

Be aware 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.  Even a small gift can push a potential Medicaid recipient over the eligibility limit.

Again, with the assistance of an experienced California elder law attorney, a potential Medicaid recipient does have some options if he or she receives a gift. Your elder law attorney may suggest paying off debts and/or purchasing a funeral plan or a Medicaid eligible annuity. If money is received before applying for Medicaid, the money can also be spent down in a similar fashion.

Do you have questions? We know this article may raise more questions than it answers. Our office is here for you and your loved ones. Please call us to schedule a meeting time.