Many seniors enjoy the opportunity to be generous to their children by gifting them monetarily. In certain circumstances, however, there is a real concern that people who may be in need of long-term nursing care in the near future should not give gifts. It can be complicated trying to adequately plan for long-term care and consider gifting. We can guide you through the planning and gifting process.
The Medicaid Rule on Gift Giving
For Medicaid to cover the huge expense of nursing-home care, a single senior must show, in Missouri in 2019, that they have less than $4,000 in available resources (excluding certain exempt assets, such as a personal residence, car and household goods and clothing). They must also show that they have not given away money or assets over the prior five years (2.5 years in California). That Medicaid rule – the “look-back period” or the “transfer penalty” – requires the senior to pay a penalty for their generosity. This penalty involves private paying for nursing-home care for a prescribed number of months. Depending on the size and number of the gifts, the penalty could be substantial.
Allowable available resources for a married couple require a different, complex analysis, considering both the resources of the senior needing care and of the senior who may be able to live independently.
Medicaid Law vs Tax Law
Many wrongly think that there is no penalty for gifts of up to around $15,000 annually. That misunderstanding confuses tax law with Medicaid law. The Medicaid rules are entirely different from the tax rules. In the Medicaid context, gifts of any amount that are given during the look-back period can be penalized. There are exceptions, however, including gifts to spouses and siblings under certain circumstances, disabled children, and children who are caregivers and who live at home with the elder for a span of time.
The Importance of Consulting an Attorney
This is a very brief summary of the Medicaid rules around gifting. The Medicaid rules are complicated and the consequences for mistakes can be very costly. There are a number of options to protect assets, including through gifts, and still qualify for benefits, but these options must be considered with great care. Contact The Estate Planner, LLC in St. Louis at 314-303-3218 for more information on Medicaid planning and gifting.
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