Posted on: Aug 2, 2019
What are Medicaid’s Gifting Rules?
Under Medicaid law, if you gift assets within five years before applying for Long-Term Care benefits, you will be ineligible for a period of time (called a transfer penalty), depending on how much you give away. While federal tax law allows individuals to gift up to $15,000 a year (in 2019) without having to report the gift, Medicaid law penalizes the gift.
Any transfer you make, however innocent, will come under scrutiny and is presumed to be for purposes of qualifying for Medicaid benefits. For example, Medicaid does not have an exception for gifts to charities. If you give money to a charity, it could affect your Medicaid eligibility down the road, especially if it is a large gift. Similarly, gifts for holidays, weddings, birthdays, and graduations could all cause a transfer penalty. If you buy something for a friend or relative, this could also result in a transfer penalty.
Be cautious! Spending a lot of cash all at once will cause the state to request documentation showing how the money was spent. If you don’t have documentation proving that you received fair market value in return for a transferred asset, you could be subject to a transfer penalty.
What are the Exemptions from the Gifting Rule?
Any transfers beyond five years are ignored by the state. This is known as the “five-year look-back rule.” However, some transfers within five years are allowed! You may transfer any asset without having to wait out a period of Medicaid ineligibility to:
- Your child who is disabled under Social Security’s definition
- A trust for the sole benefit of anyone under age 65 who is disabled
In addition, you may transfer your home to the following individuals (as well as to those listed above):
- Your child who is under age 21
- Your caregiver child who lived in your home for at least two years providing care that allowed you to stay at home during that time
- A sibling who has an equity interest in the house for at least a year
Before giving away assets, check with a qualified Medicaid Planning Elder Law attorney to ensure that gifts won’t interfere with your Medicaid eligibility.