"Hiding" assets by not reporting them on the Medicaid application is illegal and considered fraud against the state, with both civil and criminal penalties. Thus, I would not recommend it, and in my professional opinion advise- don't do it!
The Deficit Reduction Act of 2006 significantly tightened the rules on making gifts in order to qualify for Medicaid. As a result, giving money to children or grandchildren at the time long-term care is needed may have some less-than-desirable consequences.
Q: My mother is worried about spending all her money on long-term care and not being able to leave an inheritance to her children. Is there any way to "hide" money from Medicaid?
Medicaid Look Back and Penalties for Gifting
Some people choose to give their assets to someone else in order to reach the asset limit threshold. To stop this practice a "look-back" period was enacted in the Medicaid qualifying rules. The look-back period is a review of all spending- including housing costs, home improvements, care costs, daily expenditures, and gifts given leading up to the application for Medicaid benefits over a period of time defined by the state.
Prior to 2006, the look-back period was three years before the gift was made. Now, in most states the look-back period is five years before the application for Medicaid. So, as an example, if a year before applying for Medicaid you gave away the equivalent of three months of long-term care in your area, you are responsible for paying out of pocket for your first three months of care. The penalty starts at the time of applying for Medicaid. So, if you give away all your money and then apply for Medicaid, you could be in a very expensive bind. The effect of these rules is that if you need care and you have at some time in the past five years had assets, you have to use those assets (or recover what was given away) to pay for care before Medicaid benefits kick in.
Q: Mom has Alzheimer’s and lives in a facility. My sister has power of attorney. Mom wants to gift $150,000 to grand kids rather than using it to pay for care. She worked all her life paying for Medicare. Shouldn't she be able to use those funds instead of her savings?
Using Savings to Pay for Care
The Medicaid qualifying rules make it clear that if your mother needs care now and has the assets now, those assets should be devoted toward paying for her care. However, if care isn't needed now and there is time to plan for future care needs, there may be other options.
There are a number of perfectly legal techniques for preserving and protecting your mother's assets, even if she were on the Medicaid program.
For example, she can make an outright gift to you and then wait five years to apply for Medicaid. Morally and ethically, choosing this path is up to you. Once this "five-year lookback period" has passed, the gift is ignored for Medicaid eligibility purposes, no matter how large the gift. However, there is some risk in the assumption that your parent will not need care or the use of those funds for any other purpose within the next five years. A combination of a gift to you of a certain amount of money and a purchase of a Medicaid annuity is another way of protecting at least one-half of the assets so that they pass to beneficiairies. A Medicaid annuity is a special type of annuity that is irrevocable, non-transferable, immediate, and fixed to equal monthly payments. With the right type of annuity, it is non-countable as an asset for Medicaid purposes, and the purchase is not considered a gift that might otherwise cause a disqualification period.
Another way your mother can protect assets for an inheritance is by taking advantage of your state's Long-Term Care Partnership Program (not all states have this available, however). By purchasing, say, $200,000 of coverage, she can set aside up to $200,000, and if her nursing home expenses exceed the insurance coverage, Medicaid will pay for her care and the state cannot touch this protected amount. Upon your mother's death, it will pass to you. To see which states currently offer this Partnership program, see the LTC Partnership website. Medicaid is complicated, and the last thing anyone wants to do is to jeopardize a parent's quality of care. Consult an attorney who is knowledgeable in this area to be sure you understand all the options available when paying for long-term care.