Will Tuition Gifts to Grandson Need to Be Repaid in Order to Qualify for Medicaid?
My father gave his grandson, my son, a total of $20,000 for college tuition over the last four years. Will this money need to...
Read moreWe’ve all heard that it’s better to give than to receive, but if you think you might someday want to apply for Medicaid long-term care benefits, you need to be careful because giving away money or property can interfere with your eligibility.
Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid, you will be ineligible for a period of time (called a transfer penalty), depending on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $15,000 a year (in 2019) without having to pay a gift tax, Medicaid law still treats that gift as a transfer.
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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 could affect your Medicaid eligibility down the road. 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.
Spending a lot of cash all at once or over time could prompt the state to request documentation showing how the money was spent. 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:
In addition, special exceptions apply to the transfer of a home. The Medicaid applicant's home may be transferred to the individuals above, and the applicant also may freely transfer his or her home to the following individuals without incurring a transfer penalty:
Before giving away assets or property, check with your attorney to ensure that it won't affect your Medicaid eligibility. To find an attorney near you, go here: https://www.elderlawanswers.com/elder-law-attorneys.
For more information on Medicaid’s transfer rules, click here.
For more on the gift tax rules, click here.
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