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Would an Interest-Only Loan Count as a Gift for Medicaid Eligibility Purposes?

  • May 18th, 2016
I am 66 years old and I live in Florida. I am considering loaning my niece, who is also one of my beneficiaries, $30,000. I would prefer to gift her this amount (using the $28,000 husband/wife gift tax exclusion), but I am worried about Medicaid's look-back period of five years. If I set this loan up as an interest-only loan and stipulate that the loan is forgiven upon my death, would this count as a gift for Medicaid purposes?

While every state is different, Medicaid is likely to treat an interest-only loan as a gift. If the promissory note, however, calls for uniform payments and has a payment term that is shorter than your actuarial life expectancy, then it should not be penalized. For more information about promissory notes and Medicaid, click here. That said, assuming that you can afford to make such a gift, perhaps it is unlikely that you or your spouse will need Medicaid coverage in the next five years. We recommend you consult with an elder law attorney in your state to determine the best way to plan for Medicaid. To find an attorney near you, go here: http://www.elderlawanswers.com/florida-elder-law-attorneys.

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Last Modified: 05/18/2016

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