Medicaid is a vital program that helps cover medical costs for people with limited income and resources, particularly seniors. However, qualifying for Medicaid isn't always straightforward. Many factors can affect eligibility, such as gifting assets. According to ElderLawAnswers, understanding how gifts impact Medicaid eligibility for seniors is essential when planning for long-term care.
When seniors apply for Medicaid, the state examines their financial transactions over the previous five years. This is a period known as the "look-back" period. Any gifts or transfers of assets made during this time can lead to a penalty period during which the senior cannot receive Medicaid benefits. The state assumes that the seniors are intentionally impoverished to qualify for assistance and that they could have paid for their care with gifted assets.
The penalty period is the length of time a senior is ineligible for Medicaid due to gifts or transfers made during the look-back period. This period is calculated by dividing the total value of the gifts by the average monthly cost of care in the senior’s state. For instance, if a senior gives away $30,000 and the average monthly cost of care is $5,000, they would face a six-month penalty period.
Not all gifts trigger a Medicaid penalty. Some exceptions include gifts to a spouse, a child who is blind or disabled, or a trust for the benefit of a disabled person under 65 years old. Small, holiday-related gifts within reasonable limits also typically face no penalty. The monthly limit on gifting generally is around $500.
Giving someone a large sum of money or an asset qualifies as gifting, as you’d expect. However, Medicaid will also count less conventional forms of gifting when calculating a penalty period. If you sell an asset to a friend or family member at a steep discount compared to the market rate, Medicaid will assess the discount as a gift. For instance, selling a home worth $700,000 for $600,000 could be counted as a $100,000 gift.
If you expect to file for Medicaid, plan any gifting carefully. Here are some steps seniors and their families can take:
Understand the policy implications if you or a loved one consider applying for Medicaid or making significant gifts. With proper planning, you may be able to make your gift and apply for Medicaid. Find your next steps today by scheduling a consultation with our law firm.
Reference: ElderLawAnswers (May 16, 2024) “Elder Law: How Gifts Can Affect Medicaid Eligibility”
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