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In MA you can give $13,000 each year to a child. What if a parent gives the gift and enters a nursing home. The parent pays nursing home costs for 2 years while, also, gifting 3 children $13,000 each year. Will the IRS "look back" and say that money needs to be used for nursing care?

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Pokagon - well this is a big gray area isn't it!. Mom can gift you whatever and those $ fall under IRS rules. But Medicaid looks at $ gifted or transferred differently and can do a transfer penalty based on the amount "gifted". What our attorney suggested was to get a "personal services contract" done and the $ paid via the contact is income and 1099 reportable. But by doing this it won't be an issue (or well it shouldn't be if the legal was done correctly) for Medicaid later on.
imho you kinda need to figure out how much you're looking at for an IRS penalty vs a Medicaid transfer penalty and which is worse or easier to deal with should it become an issue. Whatever the case, you really need legal done by an elder care or estate attorney. Good luck.
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But if your parent is paying you room and board (my mom has dementia) and if (maybe she had to go into a nursing home...her money runs out and Medicaid has to be applied for) can't they "get" me for not reporting this on my taxes each year as income?
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Frustratedtoo - October, 2017 would be 5 years from now and she'd be 97. Alot can happen in that period of time especially with health care issues and costs. My mom is mid90's and in a NH now for a couple of years. My experience is that if they live long enough, even if they had a good nest egg, they will eventually run out of money. Personally I'd stop with the gifting now as in the situation you all are in is such that her expenses are pretty transparent and easily reviewed and the gifting will be obvious if she ever need to apply for Medicaid. What you don't want to have happen is that say in 2015 she needs to go onto Medicaid and in the review they find she gifted 30K to grandchild for college/wedding/whatever and you as the person financially responsible have to make up the 30K to the NH asap for her to stay there. And say in 2015 your personal financial & health situation has changed dramatically that you can't easily do this. Total panic situation and you really don't want to be in a bind like this if it is preventable.
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Yes, only if expenses go up I suppose. Hopefully she will never have to apply but it's hard to say what the future will hold. I guess if she stops gifting now she will most likely be fine.
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frustrated2, if her monthly income is enough to be private pay, then under what circumstances might she need to apply for Medicaid? An increase in the cost of the NH? A need for more extensive care?

If she never has to apply for Medicaid, who would care what she did with her assets? But if she does have to apply, money that she's given away may draw a penalty. I know it is sad, but I think you should consult an elder care lawyer to see if small sums can be given and what the limits are.
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I was told by a Michigan elder care attorney, any savings (monies) could be placed in a streaming annuity for my Mom. If I can't physically, emotionally care for her and have to place her(she is very ill-dementia)...perhaps that could help keep everything she has from going to a nursing home.
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Does anyone know how this would go (I know I'd need to verify with an attorney, so I am asking if anyone has experience in this kind of a situation) if a) there is only one surviving spouse b) she has pensions, long term care and social security for life and c) she has about $120,000 on hand over and above the above and is 92, already in a nursing home that allows patients to move to Medicaid if they run out of money.
Her expenses monthly right now are right 'at' the income she receives from her items listed in (b) and she has sold her home and all other assets. If she spent her cash on hand she wouldn't have 'extras' unless we were to help her with those, but the only joy she finds in life now is doing a little something for others, which means gifting them money. I would think with what she has to take care of herself aside from her nest egg, this could not be perceived as spending down, but we would feel terrible for her if we advised her wrongly. Any thoughts?
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Good point made above about the IRS vs Medicaid. It is equivalent to the thought process in a divorce - the divorce decree may say that one spouse has to pay the mortgage and the other doesn't have to. But if both names are on the note, the mortgage is still the responsibility of BOTH. Bottom line, need to talk to an attorney.
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Yes, maggiemae, your mother can pay you rent, and also for the care you provide. Medicaid rules do not expect applicants to be able to live without paying their way. To make any future application go more smoothly it is a good idea to have written documentation of the rent arrangement or the personal care agreement.
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My mother lives with me. Can she pay me rent, as I am retired and the rent would help with the cost of food, utilities etc., and not have that money count against the 5 year look back period? We live in NH.
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Igloo, our "snapshot day" was almost ten years prior to applying for Medicaid! Hubby had been hospitalized for six weeks that long ago. Fully recovered. Didn't need assitance then. Current issue (dementia) not at all related to the incident 10 years prior ... but that was our snapshot day. What a hideous mess! Even with an elder law attorney to guide us we had to re-do and re-apply. You are so right ... when there is a community spouse, the entire process is far more complicated. (My widowed mother with no assets sailed through the application process with a little help from a social worker.) When there is a spouse ... Get professional help!
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- IRS doesn't care how much $$ you gift away as long as all is properly reported and taxes paid on it if it exceeds a certain amount

- Medicaid look back is 5 years. Medicaid is needs based and you have to be at basically poverty level (about 2K in assets and 2K in income) in order to qualify and be eligible. Medicaid is a joint federal & state program (unlike Medicare and SS which are federal entitlement programs) and is administered by each state.
So what passes the Medicaid sniff test in Texas may not work for Ohio. You are best served by having an elder care attorney review the situation before you apply.
When you apply for Medicaid you allow full access to all financial and your data is just keystrokes away from being found out. Most states also have it where you recertify annually. For my mom, we had to send the last 4 months of all her banking with the recertification 6 page form and had 21 days to do this or she could be suspended from Medicaid.

- "community spouse" is super sticky to deal with and alot of this HAS TO BE DONE before day 1 of the NH admission in order to structure with the most benefit for the community spouse. Day 1 is often called the "snapshot day" and the spend down is based on what assets are there on day 1. I have not had to deal with spouse issues as my mom is a decades ago widow but one of my friends has and it can pose alot of issues that have to be dealt with in super short order and before they enter the NH. If there is still a house with a mortgage or if the spouse has never worked outside of the home and is totally dependent on the NH spouse retirement for living, they can face a critical financial situation without planning in advance. An elder care or good estate attorney can work this out to best for you.

- about spousal refusal, this can be a nightmare as the NH on Medicaid spouse can become a ward of the state and therefore you (the refusal spouse) can, if the state see's fit, be removed from any and all input on their care. The state can decide where they will be placed. Kinda like "no pay, no say" and you still have to deal with MERP - Medicaid estate recovery program upon their death. Again, you need to see an attorney in your state on all these issues.
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There is something called a spousal refusal in order to protect your assets. Please speak to an elder law attorney ASAP. My sister's husband sufferred from MS for many years & she had to do this in order to get the care he needed w/o impoverishing her & her 10 children! It is totally legal.
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When my husband was qualifying for Medicaid, my money was considered his money. I had to spend down my own pension, for example. So whether he "gave" me "his" money in the past 5 years was not relevant.

See a certified estate planner or and elder law attorney. Applying for Medicaid, especially when there is a well spouse, is complicated enough to benefit from professional guidance.
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Does this also apply to moneys between spouses? Or does Look Back not apply to husband/wife?
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Excuse me, but perhaps you did not read thoroughly, "Naomi." In fact, you echoed my post. It is always advisable to check with an Elderlaw atty. because laws vary state to state! I also said that EAs can structure funds to pay for the costs of the care! There are some posts on here that have a bit of an acidic "spirit" to them that are not in keeping within the confines of loving kindness. Let's keep the spirit alive. We are here for each other.
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What do the last 2 posts have to do w/anything? I think that you should check w/an elder law attorney before doing anythingsince every state has different laws. I will be well worth your while to invest in a consultation, especially if there is a sizable amount of money involved. There are legal ways of trusting money so that it can be gifted. If it is a trust,it doesn't belong to that person. This can also be helpful in terms of Medicaid eligibilty & probate.
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To 1daughter--this is a different matter than the gifting issue. Please repost your question on the board as separate question--but the consensus is still going to be: don't take advice from the boards. Contact an attorney in the state in which you live. An elder law atty. can help you sort out things and also help you with estate plannning and structure a plan that is tailor made to your specific situation. As far as the Medicaid and "spending down" issue that has been answered here, I personally went with my brother to an EA to get answers pertaining to the state in which my mother lives. If you have a gift from a parent, whether it is for any reason at all, and your parent has used all their funds for assisted living, nursing home, etc. then the formula specified above by another person is correct, according to the state, and within the 5 yr. look back period. Her formula precludes medicaid to pay for some 9 mos. according to her formula. According to the lawyer we saw, the nursing home won't necessarily throw the person onto the street but will sue the family members to pay the bill. Medicaid is not who comes after you. It is the facility who provided the care. At least, in the state of PA. From other posts on this board that I've read, the family is not forced to sell the property in which they live and that was true in PA as well.
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Mother, my sister and I are on the deed to the property mother is living on in WV. There is also a rental on this same property. The deed has been this way for almost 5 years. Her dementia is getting worse. If she has to enter a nursing home, will we have to sell the property for nursing home care?
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Please contact an elder law attorney. As others have already commented, you can get into a really sticky situation trying to spend your mom down so she can qualify for medicaid. There are some expenses that are legitimate; pre-paying funeral costs, for example, but don't try to wing it by taking advice from the internet. Keep in mind that the purpose of medicaid is to provided government funding for those who can't afford to pay for their own care. So, hiding money by gifting it is considered a fraudulent transfer.
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The attorney in Ohio claims $10,000 can be gifted per year from a parent to child without IRS Taxing. BUT Ruggles is exactly correct in the gifting and penalties which is entirely different IF the purpose is to give away the money to obtain medicaid benefits.
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No, you cannot and I would suggest not trying that something fraudulent like that. You can get in serious trouble that way.
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Nigle take your rhetoric and go find the RIGHT BOARD for it. THIS IT NOT IT.
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IRS & Gifting from
Thanks, Ruggles
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"IV. GIFTING AND PENALTY PERIODS.

A. The gifting rules are very harsh. If you simply give away money or assets in an attempt to impoverish yourself and obtain Medicaid benefits, IT WILL NOT WORK! If you give away any assets within the look back period of FIVE YEARS prior to making a Medicaid application, Medicaid will impose a penalty period during which you WILL NOT BE ELIGIBLE FOR MEDICAID. The penalty period corresponds to the number of months for which could have paid for the nursing home if you had kept the assets instead of giving them away.

B. For example, if you gave away $50,000 within the look back period, Medicaid would divide the $50,000 gift by the average cost of one month in the nursing home (as determined by Medicaid) to determine how many months of ineligibility it would cause. The current number is $5247 (this number changes periodically), so a $50,000 gift would cause a 9.5 month penalty period ($50,000/$5247 = 9.5). Even worse, the penalty period only starts after you are out of money and would otherwise be eligible for Medicaid, and you apply for benefits. Then, for the NEXT 9.5 months you can't get medicaid AND you have no money to pay for the nursing home. This is a very big problem, and you must plan for it.

C. The nursing home can discharge you if you have no money and Medicaid refuses to cover your costs because of a penalty
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I believe gifts aren't taxable unless they exceed a million dollars. The amount in excess of that million would be totaled for taxes, as I've been told.
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Medicaid doesn't actually want the money back from gifts made during the 5 year "look back" period - they just postpone eligibility on a pro-rated scale:

"If an individual gives away money or property during the five-year look-back, it triggers a penalty period during which he or she is ineligible for government aid.
The penalty period equals the amount given away divided by the average cost of nursing-home care in your area. So, for example, if you give $60,000 to family members and a nursing home costs $6,000 a month where you live, you can't qualify for Medicaid for ten months."
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Medicaid is a needs-based program. It is to help out persons who do not have assets/income to meet their own needs. A person who has assets is expected to spend them on their own care. When those assets are gone, Medicaid will be available to continue meeting the needs. Giving money away is not considered spending it on their own care. That is what the 5-year look back period is about.

A certified estate planner or an elder law attorney can provide guidance on preparing to qualify for Medicaid.
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It's Medicaid that will look back, not the IRS. And my understanding is that Medicaid will expect that money be paid back to pay for nursing home costs, at least in Virginia. Better check with social services before the children spend the money!
With the IRS, gifts of $13,000 can be given each year to as many people as you want. A gift tax has to be paid by the donor on anything over that amount.
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Ok hit enter before done with answer above. A parent in Texas cannot give a monetary gift, or assets gifts within the 5 year look back. It would be considered monies that could go towards a nursing home.
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