If there is a possibility that a loved one might need Medicaid assistance in the foreseeable future, that person should not be giving gifts without an attorney’s advice. This can be sad if that person gets joy out of generosity. But gifts in that situation can turn out to be very, very expensive.
Medicaid is the government program that covers some or all of the huge expense of long-term care in a nursing home in California for those who are not able to pay for it out of their own pocket. But to be eligible, Medicaid applicants must be pretty much broke. A single person is not permitted to own more than around $2,000.00. (Note, however, that some resources are excluded – like a primary residence to which the individual intends to return home).
On the filing of a Medicaid application, caseworkers will meticulously investigate the applicant’s financial history. They are looking to see whether an applicant has given away money or assets over a period of years before the Medicaid application is filed. That period of years is known as the “look-back” period. In all states except California, that period for nursing-home care is five years under the current rules. In California the period is 2.5 years.
Depending on the size and number of gifts given away during the “look-back” period, the penalty imposed as a result could be substantial.
Many think that there would be no penalty for gifts of up to around $15,000 annually. That misunderstanding confuses tax law with Medicaid law (and it also is not quite accurate under tax law, but that’s another subject). In the Medicaid context, gifts of any amount that are given during the look-back period can be penalized. Therefore, it is very important to consult with an experienced attorney in this area. There are options to protect assets and still qualify for Medicaid.
The Medicaid rules are complicated and the consequences for mistakes like gift-giving can be very costly. It’s best to consult with an attorney who is especially qualified by experience and expertise in Medicaid law.