I have some questions about Medicaid and gifting.

I have another question. When my mother was first admitted to an Assisted Living apartment she did not have enough money so all of us kids (5 of us) chipped in money so that she could have enough for the entrance fee that they charged. Later in she went on Medicaid as I told you since she had a limited income. Since she was in the hospital several times since then and so the money that she had to pay for the Nursing Home was lower and now she has a balance in her account of more than $1500. Since we loaned her that money before and Medicaid saw the letters saying that we loaned her the money (because they wanted to know where it came from), is it ok now for her to pay us all back the money that we originally gave her to pay for her fees to enter the Assisted Living?

Something that boggled my mind, for assets, was that while Mom's spouse was alive, they were jointly allowed to own $40K of assets. But after he died, Mom was only allowed to have $2K of assets to qualify for Medicaid help.

AFTER the spouse dies, the survivor can only have $2000 of assets?!? Assets were defined as ANYTHING--bank, property, car, investments, etc.

The baffling thing is, HOW did States come to that conclusion, that a surviving spouse is able to survive on only $2K worth of assets, yet the COUPLE was allowed $40K of assets?!?

Oh, and the IRS?
We were told by them, that a GIFT limit was $10K per year to a family member. Beyond that amount, raised red flags for tax purposes.
Not $13K.

To JSWHITTLE, yes, the state Medicaid department will make an annual review to make sure the patient/recipient still qualifies for Medicaid assistance. That being said, it is also the legal responsibility of the recipient to actively notify the state Medicaid department of any financial changes in circumstances that could impact their receipt of Medicaid benefits.

JS - my mom is in TX and on NH Medicaid and she has to be recertified every year. I get a detailed questionnaire as to her assets, income and changes and they want a copy of the the last 4 months bank statements from the date of the letter. And it;s like due within 15 days of letterhead date. As it happened within those months, year before last, she got several thousand $ from a hail storm insurance claim (she still has her home, which is an exempt asset and it sits empty) so I included the front & back of the canceleed checks to the roofing company so it was a zero sum gain.
Nevertheless 60 days later I had to fill out another form with more documentation on this "income" and within 7 days. I am pretty OCD on paperwork so I could do this but this is the sort of thing you need to be prepared to do.

Remember they are allowed to have 2K in assets or resources in their bank account, so if it's just $ 1,500 you should be fine. But if it's an extra $ 1,500 added to what was there and it takes her over 2K then spend it down.

I also have a question about Medicaid. My mother is on Medicaid and they did a check on her income, etc. last year. Since she qualified for Medicaid at that time, do they check every year and do all that paperwork again regarding her income or is it just a one time. I am asking because while she was in the hospital (and not in her Nursing Home), her expenses were less so she has more than $1500 in her checking account. So that is why I am wondering if they come back to us and want to do all the paperwork again. (Does that make sense). In other words, once you qualify for Medicaid do they check finances again each year?

Although it isn't a popular notion with kids that want to be taken care of, the best gift parents can give their children is to take care of themselves in their old age. Although this isn't much assistance for the above 'asker' it is important for folks reading this to keep in mind as we all plan for old age.
My husband's ex was a spoiled daughter and she became a free-fall spender as an adult. She spared no expense when it came to taking her kids shopping and buying them the best of everything. My husband made very good money while they were married and he did end up paying her spousal support after the divorce, some twenty plus years ago. She ended up with a good sized 401K and half of his pension, plus has a Masters degree (teacher) and was employed consistently until two years ago, when she evidently just decided she hated paperwork and quit doing it, was eventually fired from a tenured teachers job, let her house over the years totally disintegrate and fill up with dog poop and purchases and quit paying her bills. While she was shirking her responsibilities for grown up things, she 'helped' my stepdaughter with some college stuff, not thinking she might need the money to live some day. Last year she moved in with said daughter and darn near ruined her home life. She is a 62 year old child. Last we heard, she was going to buy a convertible with her 401K funds!
If the focus is on taking care of ourselves, acting responsible and not becoming the repeat 'gift giver' our own kids will hopefully do the same. People are living longer and longer and if you look at our country's financial situation and the health care crisis, we cannot afford to 'help' those who aren't willing to help themselves.

The first question is: Does the (or an) aging parent need Medicaid long-term level of care now (in other words, will the elder qualify medically for Medicaid?).
If so, you certainly have some things to consider.
What has not been mentioned to you is how the Medicaid applicant is penalized for assets over $2,000 ($115,000 for a couple) transferred without fair market value compensation within five years of application and how this might affect a plan of action.
Medicaid invokes a "penalty period" for ineligible transfers. This penalty period is based on the total value of the transfers divided by the "Medicaid pay rate" in your State (the monthly dollar amount the State pays a nursing home for a Medicaid beneficiary). For instance, in Florida, the Medicaid pay rate is $5,000 per month. Assume transfers totaling $100,000. The penalty period imposed would then be 20 months of Medicaid ineligibility.
Sometimes the penalty period can be part of a strategic plan. You mention, for example, that a child has been receiving "well over $13,000 per year for years". If the elder(s) otherwise qualify, it may make sense to go ahead and apply and have the penalty imposed sooner rather than later. This would start the "Medicaid clock" ticking and the elder(s) would use private funds until the penalty period ran out.
You might then ask: "Where will the private funds come from if the elder(s) is not supposed to have more than $2,000 ($115,000 for a couple) in assets?
This is where planning with the remaining assets would come in...legitimately transferring assets and creating streams of income without inducing further penalty.
One other thought. If Medicaid may be in the elder(s) future the "gifts" to the adult child must cease and a different way to transfer funds to that child need to be sought.
Good luck and God bless!

Don't forget that if a parent is supporting a child by letting them live with them, that expense should show up as household expenses. I would guess that the only gifts that count are checks written payable to that chid's name, or any large assets like a house or car. Even if they are making car payments for the child, if they own the car, that would not be a gift. It is still their car. Hope that helps. I know nothing concrete, just what I've learned through the process myself.

To further illustrate the gifting point: If a parent has say 6 grown kids and each of them has 2 children, from an IRS standpoint no one will have to pay taxes on that money if she gifts within the IRS guidelines. However, if that limit is $13,000 and each person gets that amount (13K x 18 = $234,000) and two years later she needs to go into a nursing home, is pretty much out of money and has no other income source, she will be in a big bind. It would be perceived as divesting herself and giving the money to family rather than letting Uncle Sam have it. A that point they can also put a lien on her home and property.
One more point. In our family, my husband and his brother were put on the deed to their parents' home 20 some years ago. His dad died a few years ago and shortly thereafter, his mother went into a nursing home. The house was sold. Because neither the brother nor my husband were claiming that property was their primary residence, although the proceeds of the home was split three ways, both my husband/we and my BIL/he and his wife were hit with a very big tax liability because she had lived there for 45 years and of course, there were big capital gains on the house. It is better to inherit property than to share the deed most of the time. If the house is 'intended' to be moved back in to, they cannot take your home from you. Demonstrating behavior that appears to be 'skirting the system' will almost always end badly.

You should consult an elder law attorney in your state. Basically, I believe the look back is, yes, 5 years. In that time, any effort to 'divest' one's net worth in order to qualify for Medicaid will be considered in qualifying.
The gift limit of $13,000 is only relative to IRS guidelines on the recipient and the person making the gift and paying taxes on that amount. It has NOTHING to do with Medicaid. This is where people get very confused. Regardless of the amount, if it is or can be perceived by Medicaid that giving this money away is to keep from having to pay for one's Medical care, then Medicaid can be denied. Need to be very careful about this.
The probably best thing to do is to put improvements into the house, because they cannot take your home from you. Again, talk to a lawyer. It seems most of the time, the 'kid' getting the extra cash seems to have the issues with being a responsible grown up. And parents seem to volunteer for this program.

1. The personal residence will almost always qualify for an exemption.
2. If the child is on the deed for many years, it can turn out to be a good way to avoid estate recovery by the state following the parent's death. On the other hand, putting the child's name on the deed now will result in it being deemed a very large disqualifying transfer (i.e., a gift) and if the parent applies for Medicaid within 5 years of the deed date there will be a very long penalty period.
3. There are no de minimis gift amounts, so even small gifts can be counted if made within 5 years of a Medicaid application. On the other hand, if you can prove the gifts were made exclusively for a purpose other than to qualify for Medicaid, those gifts will be ignored by the state.
4. If the parents have been supporting an adult child for whom they have no legal liability to support, all those payments are indeed gifts, as far as Medicaid is concerned.
Since you have a lot of questions, I suggest you do a little reading up on this topic by getting hold of my book "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets"; it's in some libraries, too.

ML - gifting & the transfer penalty incurred if NH Medicaid is involved is totally different from the 13K gifting under IRS rules. The IRS doesn't care how much you gift but if it is over 13K then there are taxes involved. NH Medicaid cares about any and all gifting and it's subject to a transfer penalty.

It's alot to deal with & really you should have an elder care attorney that understands how the review is done in your state; how to deal with a transfer penalty & also what your state law is in relation to MERP (estate recovery).
This is going to be long so get a cup of coffee.....

Medicaid NH rules set by each state & are state specific even though is a joint federal & state program. Qualification both financial & medical & needs-based for both. You are fully expected to spend down your assets first & foremost before the state will pay. There are things that can be done with assets in advance but imho need to be done by someone qualified who understands your state’s legal.

For NH Medicaid eligibility, an individual must show that:
1) are 65+ (can be younger if qualified disability),
2) medical condition requires skilled level of nursing care,
3) monthly income at or below their states max (varies, about 2K),
This is the “income test”– how much $ do you make. Income is social security or retirement or other monthly income
4) all countable assets are at or below 2K (higher if community spouse). This is the “asset test” – how much $ do you own. A house (to 500K value in most states) & car are non-countable. Countable assets are savings, IRA, stocks, insurance, real estate, etc. Assets must be spent-down to impoverishment.
5) have not gifted away anything of value during 5yr look-back.

If you do, could be a “transfer penalty” for gifting. Penalty based on each state’s NH daily reimbursement rate. For Texas $ 142.92. So Blue Book value car of 10K = 70 days penalty in which you have to private pay NH although they are accepted in Medicaid. If you transferred 50% home assessed at 150K, that would be a transfer penalty on 75K. Tangible property is recorded so discovered easily.

Financial look-back is up to 5 yrs. Most states require 3 – 6 mo. of all financials, plus property ownership documents with application. For car or home, that usually is current tax assessor’s statement. You sign off for state’s ability to access any & all records. State can require add’l documentation if something pique’s interest, like paperwork to establish if insurance is term or whole life (has to be cashed out)

INCOME: Exact income maximum is set by each state. Most states have “income” at $ 2,022 per mo but it can be more or less. TX is $ 2,094. Income is whatever $ they get monthly – retirement, SS, annuity, etc. If they get something that pays annually – like a dividend – it can be sticky if the amount of the dividend takes them over the income max for that mo. & you likely will have to do a specialized form to have it amoritized evenly by 12.

PNA - For an individual in NH on Medicaid, all their income has to be paid to the NH less whatever your state has as a “personal needs allowance”. PNA varies, most $60 mo, & enough to cover cable, phone or hair salon. Realistically if they have a home or car (exempt assets) there will be no real $ for elder to maintain them (insurance, taxes, upkeep, etc) so family will have to pay for all if you want to keep the elders ownership of the house.

ASSETS: All assets are counted, unless the assets fall within the short list of "noncountable" assets:
- personal possessions,
- a vehicle (some states have a limit on the value)
- a principal residence, provided it is in the same state in which the individual is applying & the house may be kept with no equity limit if the "community spouse" lives there; otherwise the equity limit is about 500K (750K in some states)
- prepaid funeral (irrevocable, NCV, usually 10K max)
- small term life insurance (usually $1,500 & NCV)
All other assets must “spend down” to states max to qualify.

The financials are what most folks focus on. But remember that they also need to medically qualify for skilled nursing care.

Your situation sounds really sticky and the amount of $ transferred sounds significant enough to raise flags on the application, imho you should start calling around now to find an elder care attorney before they have to apply for Medicaid.