The Effects of Gifts on Medicaid Planning
Medicaid is a healthcare program designed to help individuals with limited income and assets afford needed medical care. Importantly, Medicaid covers long-term healthcare services such as nursing home costs and costs for at-home personal healthcare. Because Medicaid is intended to benefit those with limited income and assets, there are strict eligibility requirements based on income and assets. Although Medicaid is a federal creation, it is jointly operated by the federal and state governments. As a result, the specific income and asset eligibility requirements for each state are different and you should consult with a Medicaid planning attorney in your area for specific eligibility advice.
As an example, a state may limit Medicaid eligibility for a married couple with a single spouse applying to $3,000 per month in taxable income for the couple with an additional income allowance for the non-applicant spouse. Similarly, the couple may be limited to $4,000 in non-exempt assets in the applicant’s name, and an additional exclusion of $100,000 of assets that may be owned by the non-applicant spouse. Additionally, most states provide for certain asset exclusions when determining Medicaid eligibility, such as exempting a certain value of the primary residence. Thus, when planning for Medicaid, the value of assets can be a major complication.
To reduce an individual’s assets, the first thought may be to gift: cash to your soon-to-be married niece, the family farm to your children, or an old car to your grandchild. However, gifting assets can have a serious impact on your eligibility for Medicaid. Under federal law, Medicaid has what is known as a five-year lookback period. This means that if you’re applying for Medicaid, the past five-years of your life will be investigated to look for gifts or other non-exempt asset transfers that reduced your assets.
When considering asset transfers in the prior five years, the only exempt transfers which will not affect your Medicaid eligibility are transfers to: (1) your spouse; (2) your child if he or she is permanently disabled or blind; or, (3) a trust for the sole benefit of anyone under 65 years of age and permanently disabled. Additionally, the transfer of your home in the following situation will not affect your Medicaid eligibility: (i) transferring your home to your child if he or she is under 21 years of age; (ii) transferring your home to your child if he or she has lived in the home for at least two years prior to you moving to a nursing home where your child’s stay at the home provided needed care so that you could stay at home during that time; or, (iii) transferring your home to a sibling if that sibling already has an equity interest in the home and has lived there two years to your moving to a nursing home. Thus, the exceptions for which a gift will not affect your Medicaid eligibility within five-years of application are extremely limited.