If Mom's Applying for Medicaid, Can She Give Her Kids Money?

The short answer is no, your mother cannot make those gifts without risking a penalty period if she applies for long-term care Medicaid soon.

The “Lookback” Rule: All Gifts Are Counted

Medicaid has strict financial rules to make sure applicants truly need financial assistance for long-term care (like nursing home care or extensive home care).

• When a person applies for Medicaid, the state will look at their financial history for the previous 60 months (five years) — this is called the “lookback period.”
• The state looks for any transfer of assets (money, property, etc.) made for less than fair market value. In the eyes of Medicaid, any gift, regardless of the amount, is presumed to be an “uncompensated transfer” (or a giveaway).
• Many people confuse the Medicaid rules with the Internal Revenue Service (IRS) annual gift tax exclusion ($19,000 per person in 2025). While the IRS doesn’t care about a gift under that amount for tax purposes, Medicaid does not follow the IRS rule. Even a small gift like $999 is counted as a transfer.

Why Your Mother’s Savings Are Close to the Limit

The financial limits for Medicaid eligibility are very low (they vary by state, but an applicant generally cannot have more than $2,000 in countable assets).

• Your mother currently has $6,000 in savings. She needs to “spend down” that extra $4,000 to meet the limit.
• If she makes the gifts:
  • She gives away $999 to three children, which is $2,997 in 2025.
  • Her savings would drop to $6,000 - $2,997 = $3,003. She is still over the $2,000 limit.
• The double penalty risk: The two years of gifts ($2,997 in 2025 and $2,997 in 2026) would total $5,994 in transfers. This amount, if made within the five-year lookback period, would trigger a penalty period (a period of time where Medicaid will not pay for her care).

A Safer Strategy: “Spending Down”

Instead of gifting, your mother should focus on legally “spending down” her extra assets until she reaches the asset limit (again, usually around $2,000 in most states). This is the safe way to reduce assets without incurring a penalty.

Acceptable ways to spend down assets may include:

• Paying medical expenses: Paying off old medical bills or purchasing needed care not covered by Medicare.
• Home improvements/repair: Making necessary repairs or modifications to her primary residence.
• Purchasing assets: Paying for a new car (usually an exempt asset regardless of value), funeral/burial plans (certain prepaid and irrevocable products), or purchasing household items/personal effects (like clothes, appliances, furniture).
• Paying off debt: Settling credit card bills, mortgage, or other outstanding loans.

The best course of action is to consult with a qualified local elder law attorney. They can review your mother’s full financial picture and help create a safe and legal spend-down plan that avoids Medicaid penalty periods