Will Medicaid allow gifting to grand children to reduce assets?

Asked by

My mom recently had an annuity that matured and she elected to cash it out and give it to her two grandchildren. Recently she fell and is not able to care for her self so my brother and I are considering having her go to a foster home/nursing home situation. Aside from her house, she has assets to sustain this for about 8-12 months. How will Medicaid look at the gifts to her grandchildren?

Answers 1 to 10 of 10
Expert Answer
116 helpful answers
Any asset transfer that doesn't return a fair market value to your mom will disqualify her from Medicaid paid nursing home care, unless there is an exception to the Medicaid transfer regulations in the state where your mom lives. Some exceptions to the asset transfer regulations in my state (Massachusetts) allow certain gift transfers that benefit disabled individuals, transfers of a home to a child who cared for the parent for 2 years or more, and transfers to a spouse. But your question doesn't indicate any of these exceptions.

If your mom has made a disqualifying transfer within 5 years of applying for nursing home coverage, Medicaid will deny the application.

There are ways to spend money that don't disqualify, and also prevent or delay the need for a nursing home admission. Buying home care services is not a disqualifying transfer, because your mom is getting fair value in return for the payment of money. Family members can be paid to provide home care services. The Medicaid agency in your state will require documentation of the payments, if your mom needs to apply at some point. A caregiver contract and payroll records could provide evidence that the transfers were not disqualifying.

It is ironic, but elders who experience declining health may abruptly decide to make gift transfers that are motivated by fear of nursing home costs, at the very moment their funds could best be used to provide care at home that can prevent falls and further decline of health. The decision to make the gift transfer results in the need for a nursing home, the source of their initial fear.

The gift to grandchildren, or any other transfer, won't be listed on a Medicaid application if your mom applies for Medicaid nursing home care 5 years after the gift. You explained that she has enough funds to cover her care for 1 year.

If your mom can retrieve the gifted funds, and get advice you can rely on from an elder law attorney and a geriatric care manager in your mom's area, you and your mom could put together a plan that would protect her in the months and years ahead. The team approach should bring your mom to a safe living situation, and peace of mind for you and your brother.

And, check on the transfer rules in your state for home care paid by Medicaid, if your mom is able to receive sufficient care at home.
ABSOLUTELY NO!! She has to get it all back for her own care. If she gave away $100,000, Medicaid will not cover her until it is paid back.
Wee1 - 14K is for IRS taxes due. Doesn't apply for Medicaid. For Medicaid any gifting or transferring within a 5 year period is subject to a transfer inquiry review. Any check or withdrawal can get an inquiry letter if done within the 5 year lookback. You have to be impoverished to get onto Medicaid. For NH Medicaid, you have to show "at-need" for both medical (needing skilled services) and financial (impoverished)

Meonly - was your mom on Medicaid? if mom was on Medicaid years ago, the rules were different. When DRA put into place in 2005 - 2007 (when depends on your state) totally changed in how the states have to do a look-back and now requires a recovery for costs Medicaid paid from the estate of the recipient (MERP). Some states have it so LE are not outside of review as an asset for Medicaid anymore. Pretty well now all assets have to be outside a 5 year review in order not to have an transfer penalty inquiry done. Real property is easy as tax assessor provides this info to the state so that's just a couple of keystrokes to find if property gifted or sold and what value was. For Medicaid application, you provide bank statements and awards letters for years. If maw maw had 50K 3 years ago and gets 1K a mo SS and lives with family & is now claiming to be impoverished for Medicaid, there was a transfer done somewhere that was not allowed as she should have still a good amount of $. She would need provide documented proof as to where that 86K vanished to in 3 years. Its a pretty simple forensic accounting to do this - a "pattern of spending" program or worksheet. Most states use one.

For Medicaid, the only way to get around asset avoidance is to plan 6 years in advance of the need for Medicaid. Since none of us have a crystal ball, and that parents often do not need care until a situation occurs (fall with broken hip is like Numero Uno for going into a NH), it's really hard to do advance planning. It's all panic and piecemeal to get them into IL, AL or NH and then figure out a way to pay for it. Personally I think that at 70 or maybe 75 parents & their POA child should have a come to Jesus meeting on assets and start to divest. But if your parent won't work with you on all this, you just do the best you can.

Really if they live long enough - unless they are generationally wealthy - they will run out of money and their health will decline to the point that they need a NH and that means they apply for Medicaid as they have outlived their careful savings. One reason why the wealthy stay wealthy is that they are not adverse to letting go of assets; or changing the structure of ownership of assets and in spending $ on legal to get it done right for however your state laws run. You grow up in which doing a SCIN on grandpa's properties are done right before the actuarial tables cause an issue. Trusts set up in grandkids names as they have little tax exposure. Things are owned by inc's, llc or other legal entities that cannot be counted as an asset or you cannot be held liable for. It's not so much about asset avoidance for Medicaid - as for the wealthy the $ is there for private paid for caregivers- but about growing up planning & doing whatever to reduce exposure on taxes & liability.

To maximize for mom for today or your inheritance tomorrow, you would have had to start planning for it back in 2009 to get everything transferred or sold by Summer 2010. If your parents are likely to need Medicaid, you just cannot wait till an event happens IF you want to transfer assets. Transfering their savings and cashing in their CD's today means a penalty till Summer of 2020 and that is a long long time
i think you should consult an expert. The gifting doesn't have tax consequences, but Medicaid is for those too poor to pay for Nursing Home. So if you had money to gift then you should have used it for nursing home. That is were people get caught up - should get professional advise. I'm definitely not an expert!
pamstegma is correct- find out the guidelines for your state Medicaid and read carefully, consult an eldercare attorney. My husbands' grandma decided to sell some land and gift the money to her children. She was paying for her own assisted living but then had to transition to much more expensive nursing home care. Her children did have to pay it back and it was horrible obviously - they pretty much had spent it and really didn't expect to pay it back. No one thought about the 5 year timeline or what that meant. Good luck to you.
Please explain the five year timeline as far as giving away money. My confusion lies in the fact that you can give $14,000 per year to anyone without tax consequences.
Remember Medicaid is paid via the taxpayers [State and Federal] and if elders gave away their money so they can later live rent-free with free full-time caregiving in a nursing home, the U.S. government would either be bankrupted or our tax bases with go sky high.

Of course, there are elders who think they have plenty of money for their old age, thus will give the $14k to each of their children and grand-children. Then there is a medical situation and a move to continuing care..... never realizing that one year in a nursing facility could cost them approx $100k, if not more, per year. Oops.
When my Mother went to a lawyer to have a DPOA done, he asked her if she gifted to me, the daughter or to her grandchildren. She answered no. He then told her she could gift $19K to a family member per year. He then asked her if all financial accounts had my name on them as an equal along with LE on her property. She has had my name of everything financially for many years but she didn't remember putting the acreage in LE. The lawyer's secretary called the court house to fax a copy showing what had been done. Mother had put the property in LE with me in 1998. The lawyer provided a quick claim deed along with the POA. I remember him telling her that nothing would have to be probated if the estate was handled this way. I had done 3 probates for my 2 brothers and Grandmother.
No.
Thank you igloo572. Mother isn't on Medicaid, never has been. Thank you for all of the good information. I tried to talk to Mother about certain things 10 or more years ago. She thought she would lose control but did add my name to her banking accounts and LE on the acreage since 1995. I'll want to go back and read your comment again. I got a lot from it. Thank you again.

Share your answer

Please enter your Answer

Ask a Question

Reach thousands of elder care experts and family caregivers
Get answers in 10 minutes or less
Receive personalized caregiving advice and support