I am an attorney with 25 years' experience doing Medicaid planning. My book "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets" is devoted to answering this question and also how to plan to minimize or eliminate asset spend downs! That being said, let me clear up a few items discussed above:
1. $13,000 gift exemption: This figure relates solely to a Federal GIFT TAX exemption and has no relation to Medicaid rules. Anyone concerned with Medicaid coverage will never make anywhere near the $5,120,000 of lifetime gifts permitted before a federal gift tax is due! Thus, for all practical purposes, the $13,000 limit can be ignored for anyone worried about Medicaid.
2. 5-Year Lookback: As stated by others above, when a person makes a gift of virtually any amount within the 5-year period preceding the date that person applies for Medicaid, those gifts are added together and will result in a disqualification period. The length of the disqualification (or "penalty") period depends on the total amount of the gifts made within the 5-year period and also the penalty divisor of the state where they are applying for Medicaid. For example, in a state where the penalty divisor is $5,000, if the total gifts made within the lookback period equal $50,000, then the penalty will be 10 months.
So the bottom line is that there is NO minimum amount a parent can gift their children to avoid the 5-year lookback period. But once 5 years has passed following a particular gift, that gift will no longer count when the person who made the gift applies for Medicaid.
I'm not sure what exactly you are referring to with regards to a 13k gift. My limited knowledge of the 5-year look back is related to assets that have been transferred into someone else's name or a Trust as well as assets that have been given away to another individual within the 5-years prior to the date of applying for Medicaid. Under some, but not all circumstances, assets (money included) that has been transferred and/or given away outside of the 5-year period are not subject to scrutiny as part of the Medicaid qualification process but those assets that have been transferred and/or given awaying inside of the 5-year period are subject to scruntiny and are usually included in determining the candidate's total assets. My specific experience: When getting my grandfather qualified, because my grandmother was alive, their home was by default not considered in the equation (aside from the deed had to be transferred out of my grandfather's name an solely into my grandmother's) but there was still an asset amount maximum that was set and there was a level of "spend down" that had to be done in order for him to qualify. After my grandfather passed away, their Attorney advised that we move everything into a Trust so that nothing would be in my grandmother's name (she was diagnosed with Alzheimer's) and that after at least 5 years, if she needed to qualify for Medicaid, her home and other assets would not be a factor in her qualification. Unfortunately, within a max of 2 year, my grandmother had to be placed in a nursing home and when Medicaid did their 5 year look back, they saw that she owned a home and other assets; the fact that these had all since been moved into a Trust was completely irrelevant in their eyes. So that leaves us having to get all of those assets sold in order for her to qualify for Medicaid. On top of all that, the Medicaid folks have told us that we must transfer everything out of the Trust and back into my grandmother's name (yes, the attorney has to do all of the paperwork to undo what he just did a few years ago) and my grandmother's home has been on the market for several months now. Medicaid has proof of the home being for sale so at this point we are hoping for "conditional" qualification at least.
I'm not sure if the 13k gift you mention has to do with monies that the person who is applying for Medicaid gave to someone or received. Either way, I would think that if either occurred within 5 years of applying for Medicaid then it may be considered an asset and potentially subject to spend-down or even a penalty (I don't know much about penalties, but our case worker has mentioned it in passing on many occasions). The rules vary from state to state, my experience is based on New Jersey. If you don't feel comfortable discussing with a Medicaid case-worker, definitely try to talk to an attorney that is well versed in elder care and/or estate planning.
I am confused about how much money a parent can "gift" her children - she is already in assisted living (private pay), no living spouse, no way of predicting how long she will be in assisted living other than deducting $5500 per month from her assets to come up with the month and year she will be "booted out". If I am understanding this correctly the parent is no longer allowed to "gift" anything to her children as soon as any health issue presents itself...due to the Medicaid watchdogs??? Would that be a correct assessment of the rules of the road?
Ohio - I am in the process "spending down" to get my Dad qualified for Medicaid. My mom is still alive and my dad has been admitted for long term care into a NH and they have very little money. There are a number of calculations based on average life expectancies that determine how much the "community spouse" can keep. Once that number is determined, you have to spend down to it. That included cashing in life insurance policies, (although they get to keep at least one with a value no more than $1500), and any stocks or investments. The 5-year look back is for the governmnet to see if you were trying to hide money. So if you think an elder is going to need nursing home care with 5 years (but who really knows that!), don't give away large sums of money to relatives. That would make you Medicaid ineligible for a period of time. They call it a penalty. At that time, all nursing home costs would be private pay until you are eligible again. There are different rules in differetn states and if a community spouse is still alive, like they can't take your home or car. So we are prepaying both their funeral expenses (allowed), buying Mom some new clothes and shoes (allowed) and new hearing aids. As long as the items you buy are for the direct benefit on the institutional spouse or the community spouse and you can prove the purchase, you can spend it. But you can't buy at $3,000 watch! Any transaction over $1,000 will be looked at. Hope this helps!
Wow, lots of good information here. SelfishSiblings, do you know if they are forced to cash in an annuity, even if it was purchased more than 5 years ago or less than 5 years ago? Do you know how we can get a list of what is "allowable"?
My parents transferred their house into a revocable trust on January 18, 2012. My mother is now ill and might have to go to a nursing home. Will the 5 year look back apply to this trust? What happens to the house on January 19, 2017? Thanks for any answers.
Ohio, NH (aka skilled nursing facility/SNF or long term care/LTC) is paid for 3 ways: 1) private pay by either the elder or their family; 2) from LTC insurance; or 3) by qualifying for Medicaid, a needs based entitlement program that is a state and federal partnership (unlike Medicare - which is federal).
Because of this, Medicaid rules are determined by each state & are state specific under a federal "umbrella" of guidelines. So how it runs in GA will be different yet sometime similar than TX program. A lot of what happens, especially after the Medicaid recipient dies, is very much dependent on what the states view is on property rights, estate/death, probate laws, etc. Yep, confusing.
For NH Medicaid eligibility, an individual must show that: 1) are 65+, 2) medical condition requires that level of nursing care, Just being old, having dementia, etc. may not be enough. 3) monthly income at or below their states max (about 2K), This is the “income test”– how much $ do you make. Texas is $2,094. 4) all countable assets are at or below 2K This is the “asset test” – how much $ do you own. 5) not gifted away anything of value during 5yr look-back period.
If you do, there could be a “transfer penalty” when items are gifted. Penalty different for each state as it’s based on each state’s NH reimbursement rate. For Texas, it is $ 142.92 a day rate.
Max look-back is 5 yrs. Most states require 3 – 6 mo. of financials along with all life funeral, burial & health insurance policies with initial Medicaid application. The NH usually submits the application with whatever documents you give them along with their request for payment from the state. The state can require more financials if something pique’s interest or something is unclear.
INCOME: This is their SS monthly check and any retirement or other $ paid to them on a regular basis. The max is basically 2K, & each state has it's own specific amount. If there is a community spouse, the income allowed is different. If it is that every month they are over the states income limit BUT not enough to pay in full for the NH and qualifies for NH in every other way, then they can see an elder care attorney to do a "Miller Trust" or a "Qualified Income Trust". Say mom gets 1K from SS & 1,500K from retirement every mo. Income = $2,500. Basically is $ 500 over ceiling for monthly income. No matter what is always is $500 over. So this excess $ 500 is what funds the trust and therefore mom’s income is now 2K and within the states income ceiling. The beneficiary of the trust is state's Medicaid program and upon death reverts to the state. Miller really has to be done by an attorney who does elder law as it needs to be flexible/adaptable and meet the criteria of each state's law on probate (death laws) & Medicaid rules.
ASSETS: All assets are counted, unless the assets fall within the short list of "noncountable" assets. The noncountable's are: - personal possessions, - a vehicle (some states have a limit on the value) - their principal residence, provided it is in the same state in which the individual is applying for coverage & the house may be kept with no equity limit if "community spouse" lives there; otherwise the equity limit is 500K (750K in some states) - prepaid funeral (irrevocable, NCV, usually 10K max) - small amount of term life insurance (usually $1,500 & NCV) All other assets (savings, stocks, cash value insurance policies, rental property) are counted.Must “spend down” to get to their states max (+/- 2K) to qualify.
The financials are what most folks focus on. But remember that they also need to medically qualify for skilled care for Medicaid.
Most NH admissions come from a hospital discharge. If an individual covered by MediCARE is discharge from a hospital to a nursing home for continued care (rehabilitation) after an inpatient stay of at least 3 days, Medicare will cover 100% of the first 20 days and MAY pay up to 100 days, subject to a co-payment by the patient of $141.50 per day for days 21 to 100 (for 2011). Medicare does not pay for the many months/years that some people reside in a NH for long-term custodial care. In general, Medicare is limited to short-term acute care. But this MediCARE paid time in NH is when you need to get the documents together to apply for MedicAID if you need to go that route. Good Luck & keep a sense of humor.
This p*sses me off to no end and it's destroyed many families inheritance.
The five year look back assets theft (theft is what it is in any rational understanding) should be illegal. It's no different than if a bank would say "anything you've sold, gained or earned within 5 years prior to your loan is subject to our ability to come after if you default. Banks are not allowed to do that because it is viewed as theft, banks are forced thru regulation to use current present assets and income as guarantee of loan... meaning, the government is a thief.
When you look at a persons earned income and the government has already taken large portions of that through social security, taxes, etc for approximately 50 years of any individuals earning life.(meaning the individual has paid thru the nose for any benefits they may receive from Medicaid) .. so, for the government to turn around and demand a persons past 5 year (or any length of time) assets as being theirs to access and use at their discretion (for allowing an individual to take advantage of assistance the individual has already paid for over 50 years), because the government views 5 years prior financial and estate value as theirs to use as payback assets to grab from, that folks is legalized theft. And there is no rationale argument to the opposing that would hold in any honest court of law. The government would be found guilty of theft.
The government has created itself to be the "God and director" of every individuals financial earning life. The government only views human life as it's ability to be earn-able sources of income, meaning the population is only Valued as dollars. The government is directing and creating law to control every individuals value of income from birth to death, and have been stealing from every single individuals earned income since that individual has been earning. So after 50 plus years (average) of stealing from each individuals earned and other income, it now goes further and forces (the 5 year look back) ... the individual now at end earning cycle of life regarding age in years (usually by age 70 properties are the last value and are beginning to be inherited and passed on thru lineage etc) ... The government now secures itself-to even those assets of the individual by forcing the pay back of the very money the governments already been stealing from the individual it's entire life.. the government is one of the largest most dangerous thiefs ever created.
1. $13,000 gift exemption: This figure relates solely to a Federal GIFT TAX exemption and has no relation to Medicaid rules. Anyone concerned with Medicaid coverage will never make anywhere near the $5,120,000 of lifetime gifts permitted before a federal gift tax is due! Thus, for all practical purposes, the $13,000 limit can be ignored for anyone worried about Medicaid.
2. 5-Year Lookback: As stated by others above, when a person makes a gift of virtually any amount within the 5-year period preceding the date that person applies for Medicaid, those gifts are added together and will result in a disqualification period. The length of the disqualification (or "penalty") period depends on the total amount of the gifts made within the 5-year period and also the penalty divisor of the state where they are applying for Medicaid. For example, in a state where the penalty divisor is $5,000, if the total gifts made within the lookback period equal $50,000, then the penalty will be 10 months.
So the bottom line is that there is NO minimum amount a parent can gift their children to avoid the 5-year lookback period. But once 5 years has passed following a particular gift, that gift will no longer count when the person who made the gift applies for Medicaid.
I hope that helps!
I'm not sure if the 13k gift you mention has to do with monies that the person who is applying for Medicaid gave to someone or received. Either way, I would think that if either occurred within 5 years of applying for Medicaid then it may be considered an asset and potentially subject to spend-down or even a penalty (I don't know much about penalties, but our case worker has mentioned it in passing on many occasions). The rules vary from state to state, my experience is based on New Jersey. If you don't feel comfortable discussing with a Medicaid case-worker, definitely try to talk to an attorney that is well versed in elder care and/or estate planning.
Sorry to be long-winded. Hope this helps.
Hope this helps!
xo
-SS
Because of this, Medicaid rules are determined by each state & are state specific under a federal "umbrella" of guidelines. So how it runs in GA will be different yet sometime similar than TX program. A lot of what happens, especially after the Medicaid recipient dies, is very much dependent on what the states view is on property rights, estate/death, probate laws, etc. Yep, confusing.
For NH Medicaid eligibility, an individual must show that:
1) are 65+,
2) medical condition requires that level of nursing care,
Just being old, having dementia, etc. may not be enough.
3) monthly income at or below their states max (about 2K),
This is the “income test”– how much $ do you make. Texas is $2,094.
4) all countable assets are at or below 2K
This is the “asset test” – how much $ do you own.
5) not gifted away anything of value during 5yr look-back period.
If you do, there could be a “transfer penalty” when items are gifted. Penalty different for each state as it’s based on each state’s NH reimbursement rate. For Texas, it is $ 142.92 a day rate.
Max look-back is 5 yrs. Most states require 3 – 6 mo. of financials along with all life funeral, burial & health insurance policies with initial Medicaid application. The NH usually submits the application with whatever documents you give them along with their request for payment from the state. The state can require more financials if something pique’s interest or something is unclear.
INCOME: This is their SS monthly check and any retirement or other $ paid to them on a regular basis. The max is basically 2K, & each state has it's own specific amount. If there is a community spouse, the income allowed is different.
If it is that every month they are over the states income limit BUT not enough to pay in full for the NH and qualifies for NH in every other way, then they can see an elder care attorney to do a "Miller Trust" or a "Qualified Income Trust". Say mom gets 1K from SS & 1,500K from retirement every mo. Income = $2,500. Basically is $ 500 over ceiling for monthly income. No matter what is always is $500 over. So this excess $ 500 is what funds the trust and therefore mom’s income is now 2K and within the states income ceiling. The beneficiary of the trust is state's Medicaid program and upon death reverts to the state. Miller really has to be done by an attorney who does elder law as it needs to be flexible/adaptable and meet the criteria of each state's law on probate (death laws) & Medicaid rules.
ASSETS: All assets are counted, unless the assets fall within the short list of "noncountable" assets. The noncountable's are:
- personal possessions,
- a vehicle (some states have a limit on the value)
- their principal residence, provided it is in the same state in which the individual is applying for coverage & the house may be kept with no equity limit if "community spouse" lives there; otherwise the equity limit is 500K (750K in some states)
- prepaid funeral (irrevocable, NCV, usually 10K max)
- small amount of term life insurance (usually $1,500 & NCV)
All other assets (savings, stocks, cash value insurance policies, rental property) are counted.Must “spend down” to get to their states max (+/- 2K) to qualify.
The financials are what most folks focus on. But remember that they also need to medically qualify for skilled care for Medicaid.
Most NH admissions come from a hospital discharge. If an individual covered by MediCARE is discharge from a hospital to a nursing home for continued care (rehabilitation) after an inpatient stay of at least 3 days, Medicare will cover 100% of the first 20 days and MAY pay up to 100 days, subject to a co-payment by the patient of $141.50 per day for days 21 to 100 (for 2011). Medicare does not pay for the many months/years that some people reside in a NH for long-term custodial care. In general, Medicare is limited to short-term acute care. But this MediCARE paid time in NH is when you need to get the documents together to apply for MedicAID if you need to go that route. Good Luck & keep a sense of humor.
The five year look back assets theft (theft is what it is in any rational understanding) should be illegal. It's no different than if a bank would say "anything you've sold, gained or earned within 5 years prior to your loan is subject to our ability to come after if you default. Banks are not allowed to do that because it is viewed as theft, banks are forced thru regulation to use current present assets and income as guarantee of loan... meaning, the government is a thief.
When you look at a persons earned income and the government has already taken large portions of that through social security, taxes, etc for approximately 50 years of any individuals earning life.(meaning the individual has paid thru the nose for any benefits they may receive from Medicaid) .. so, for the government to turn around and demand a persons past 5 year (or any length of time) assets as being theirs to access and use at their discretion (for allowing an individual to take advantage of assistance the individual has already paid for over 50 years), because the government views 5 years prior financial and estate value as theirs to use as payback assets to grab from, that folks is legalized theft. And there is no rationale argument to the opposing that would hold in any honest court of law. The government would be found guilty of theft.
The government has created itself to be the "God and director" of every individuals financial earning life. The government only views human life as it's ability to be earn-able sources of income, meaning the population is only Valued as dollars. The government is directing and creating law to control every individuals value of income from birth to death, and have been stealing from every single individuals earned income since that individual has been earning. So after 50 plus years (average) of stealing from each individuals earned and other income, it now goes further and forces (the 5 year look back) ... the individual now at end earning cycle of life regarding age in years (usually by age 70 properties are the last value and are beginning to be inherited and passed on thru lineage etc) ... The government now secures itself-to even those assets of the individual by forcing the pay back of the very money the governments already been stealing from the individual it's entire life.. the government is one of the largest most dangerous thiefs ever created.
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