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My mom was living with my sister and buying groceries, paying bills, buying them things for the home, etc., and above that just gave them $16,000 to pay for a couple extra months in a home that they knew they were going to lose, and now she has nothing other than what another sister and I have managed to save for her elder care. Will she be penalized for this "gift"?

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Oh, I should have looked at your profile first. I see that your mother is already in a nursing home. I still think the family will need to pay $16,000 before she will be approved for Medicaid.
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Yes, this will be considered a gift. And the amount above the gifting tax law is taxable on her tax return.

Why did she give them $16,000 to pay for two months on a house they knew they were going to lose? It must really be an expensive house for $16,000 would pay for 16 months for my house.

$16,000 probably would have paid for her to be in a nursing home for two months while applying for Medicaid. Now family members will likely need to pay $16,000 on her care before she will qualify for Medicaid.
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