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I suppose it might depend on what care the grandson was providing over the 24/7, how much he was paid, and whether there was any demonstrable contract or formal understanding. Was the arrangement on record anywhere? Even a doctor's or OT's or social worker's needs assessment stating 'care provided by resident grandson' would be a start.
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For it to have been wages rather than a gift, the wages would have had to have been claimed as income by the grandson and claimed as paid wages by the grandfather during the time of the employment (not in a lump sum after the fact). If this was not done, then it is definitely a gift.

Angel
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According to the attorney, it's a gift. This attorney is helping my family purchase an annuity (half loaf strategy) to cover some Medicaid costs. I still don't agree that paying his grandson was a gift (I think my family should've gotten a second opinion).
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"some people" are idiots. Talk to an attorney or benefits counselor.
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Since you had a contract that should really help depending on the details of the contract. Did you have an attorney draw up the contract? If so, perhaps a phone call to the attorney would give you some guidance. That is if the attorney understands Medicaid requirements. Could the grandson prove that he didn't have another job during this time if he were challenged? Each state has the potential to have different rules. This is such an important question, you should seek expert advice. Let us know what you find out.
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My family is starting to apply for medicaid and we are getting conflicting info about this payment. My family had a contract and paid the grandson SS and taxes so for the IRS is was legitimate, but some people are telling us medicaid will still consider it a gift because it was a family member.
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