In MA you can give $13,000 each year to a child. What if a parent gives the gift and enters a nursing home. The parent pays nursing home costs for 2 years while, also, gifting 3 children $13,000 each year. Will the IRS "look back" and say that money needs to be used for nursing care?
imho you kinda need to figure out how much you're looking at for an IRS penalty vs a Medicaid transfer penalty and which is worse or easier to deal with should it become an issue. Whatever the case, you really need legal done by an elder care or estate attorney. Good luck.
If she never has to apply for Medicaid, who would care what she did with her assets? But if she does have to apply, money that she's given away may draw a penalty. I know it is sad, but I think you should consult an elder care lawyer to see if small sums can be given and what the limits are.
Her expenses monthly right now are right 'at' the income she receives from her items listed in (b) and she has sold her home and all other assets. If she spent her cash on hand she wouldn't have 'extras' unless we were to help her with those, but the only joy she finds in life now is doing a little something for others, which means gifting them money. I would think with what she has to take care of herself aside from her nest egg, this could not be perceived as spending down, but we would feel terrible for her if we advised her wrongly. Any thoughts?
- Medicaid look back is 5 years. Medicaid is needs based and you have to be at basically poverty level (about 2K in assets and 2K in income) in order to qualify and be eligible. Medicaid is a joint federal & state program (unlike Medicare and SS which are federal entitlement programs) and is administered by each state.
So what passes the Medicaid sniff test in Texas may not work for Ohio. You are best served by having an elder care attorney review the situation before you apply.
When you apply for Medicaid you allow full access to all financial and your data is just keystrokes away from being found out. Most states also have it where you recertify annually. For my mom, we had to send the last 4 months of all her banking with the recertification 6 page form and had 21 days to do this or she could be suspended from Medicaid.
- "community spouse" is super sticky to deal with and alot of this HAS TO BE DONE before day 1 of the NH admission in order to structure with the most benefit for the community spouse. Day 1 is often called the "snapshot day" and the spend down is based on what assets are there on day 1. I have not had to deal with spouse issues as my mom is a decades ago widow but one of my friends has and it can pose alot of issues that have to be dealt with in super short order and before they enter the NH. If there is still a house with a mortgage or if the spouse has never worked outside of the home and is totally dependent on the NH spouse retirement for living, they can face a critical financial situation without planning in advance. An elder care or good estate attorney can work this out to best for you.
- about spousal refusal, this can be a nightmare as the NH on Medicaid spouse can become a ward of the state and therefore you (the refusal spouse) can, if the state see's fit, be removed from any and all input on their care. The state can decide where they will be placed. Kinda like "no pay, no say" and you still have to deal with MERP - Medicaid estate recovery program upon their death. Again, you need to see an attorney in your state on all these issues.
See a certified estate planner or and elder law attorney. Applying for Medicaid, especially when there is a well spouse, is complicated enough to benefit from professional guidance.
Thanks, Ruggles
A. The gifting rules are very harsh. If you simply give away money or assets in an attempt to impoverish yourself and obtain Medicaid benefits, IT WILL NOT WORK! If you give away any assets within the look back period of FIVE YEARS prior to making a Medicaid application, Medicaid will impose a penalty period during which you WILL NOT BE ELIGIBLE FOR MEDICAID. The penalty period corresponds to the number of months for which could have paid for the nursing home if you had kept the assets instead of giving them away.
B. For example, if you gave away $50,000 within the look back period, Medicaid would divide the $50,000 gift by the average cost of one month in the nursing home (as determined by Medicaid) to determine how many months of ineligibility it would cause. The current number is $5247 (this number changes periodically), so a $50,000 gift would cause a 9.5 month penalty period ($50,000/$5247 = 9.5). Even worse, the penalty period only starts after you are out of money and would otherwise be eligible for Medicaid, and you apply for benefits. Then, for the NEXT 9.5 months you can't get medicaid AND you have no money to pay for the nursing home. This is a very big problem, and you must plan for it.
C. The nursing home can discharge you if you have no money and Medicaid refuses to cover your costs because of a penalty
"If an individual gives away money or property during the five-year look-back, it triggers a penalty period during which he or she is ineligible for government aid.
The penalty period equals the amount given away divided by the average cost of nursing-home care in your area. So, for example, if you give $60,000 to family members and a nursing home costs $6,000 a month where you live, you can't qualify for Medicaid for ten months."
A certified estate planner or an elder law attorney can provide guidance on preparing to qualify for Medicaid.
With the IRS, gifts of $13,000 can be given each year to as many people as you want. A gift tax has to be paid by the donor on anything over that amount.