Medicaid eligibility and gifting

[Brand New Day]

Now that we can gift $13K p/p p/y and not run afoul with the IRS and taxes. The question is, What about Medicaid eligibility? Does that 13K upset medicaid rules and gets considered part of the "look back" 5 year time period. Example: say, MIL has 200K, 3 kids. If she gave each kid $13K in 2008, 2009, and 2010, leaving her with $83,000. Will Medicaid require her to spend 200K or 83K before she will receive $$$ from Medicaid to pay for nursing home care.

I gather each state is a little different, but not significantly. She now lives in Va. if anyone knows any specifics.

 

[al_bundy]

get a lawyer, there is an entire field dedicated to this. and there are specialties who work in this field where a graduate degree is required to do any kind of meaningful work. there are a lot of laws and regulations and it's very complicated

 

[ChrisC]

The short answer is that gift tax reporting or exclusions have nothing to do with Medicaid eligibility, resources taken into account within the 5 year look-back period, permitted transfers that don't count as resources, or "spend-down" of assets before full coverage of Medicaid. I, too, would suggest you get the services of a competent Elder Care Lawyer before your family starts planning anything, including "gifting" away assets.

 

[youbet]

I would also look into your state's Medicaid program to be sure MIL isn't giving up resources that would be well spent on herself as opposed to accepting whatever Medicaid will provide. If the kiddies accept her gifts and spend or invest the money in ways where it would be forever unavailable for her care, and if Medicaid in your state doesn't do a good job of providing what she needs, then the kiddies would have to be shot in the kneecaps!

 

[ChrisC]

I would also look into your state's Medicaid program to be sure MIL isn't giving up resources that would be well spent on herself as opposed to accepting whatever Medicaid will provide. If the kiddies accept her gifts and spend or invest the money in ways where it would be forever unavailable for her care, and if Medicaid in your state doesn't do a good job of providing what she needs, then the kiddies would have to be shot in the kneecaps!

Very good point -- and a good Elder Care Lawyer with the MIL as the client would simply not let this happen. This is a quality of care concern that's especially significant in some areas of the country depending on the nature of MIL's long term care. I learned some of this in exploring care options for my mother in New York and Virginia. In New York City, many of the desirable assisted living facilities will only take private-pay patients or have a limit on the number of Medicaid patients they will accommodate. (However, almost all nursing home care facilities in NYC will take Medicaid patients with few restrictions on number of beds.) This basically means that if someone would be better off in an assisted living facility in New York City, there's a big difference in quality of care depending on whether you're paying for that with your own resources or with Medicaid. Essentially you better have some resources available to you if you want the more desirable assisted living facilities in NYC (and once you run through those recources, Medicaid will kick in and virtually all of these facilities won't kick the out the Medicaid patient that was originally a private-pay patient -- might mean a slight down-sizing of services). With nursing home care facilities, whether you have your own resources or are relying on Medicaid doesn't make a big difference for the most part. The top-rated nursing home care facilities in NYC have Medicaid patients primarily.

In northern Virginia, I was pleasantly surprised that lots of good facilities, both assisted living and nursing home care, take Medicaid patients with few restrictions on number of beds available for them.

The point of gifting is not to make your family member any worse off as a result of the gift -- it should be care neutral to the donor! Liquid assets should remain available for the long term care needs of the donor, especially if the most desired care facility or care giving will only take private-pay patients -- let's say MIL might be best served by a home care program with a private nurse and that this can only be accomplished by private-pay. Gifting assets might essentially take away that option and that would be so wrong, and someone's some knee-caps would need to be broken.

 

[al_bundy]

i think there is also a law that says if you have any kind of property and you end up with medicaid, then the government takes it after you die as payment

 

[Brand New Day]

Thanks for the feed back

Agreed, it all gets complicated. And what if one of the kids dies before MIL, then what, kid's Will gets executed and money is probably gone.

Thanks for the insight, Sorry it took me so long to get back with the thanks, but I'm on a SLOW dial up line most of the time, so getting on is a pain.

Again, appreicate the info.

 

[randyman65]

Am I the only one who finds the OP's desire to shift assets at the expense of my tax dollars repugnant? There are enough people stealing money from me without someone gaming the system to give $120k to family members so they can get the taxpayer - most of whom will never see $120k in their lives - to pay for eldercare.

The OP should be the one whose kneecaps should be broken.

 

[ChrisC]

Am I the only one who finds the OP's desire to shift assets at the expense of my tax dollars repugnant? There are enough people stealing money from me without someone gaming the system to give $120k to family members so they can get the taxpayer - most of whom will never see $120k in their lives - to pay for eldercare.

The OP should be the one whose kneecaps should be broken.

The OP wants to know if "gifting" has some consequence for Medicaid eligibility. It's not "gaming" if you're playing by the rules and you don't violate the spirit or the letter of the rules. The OP is a taxpayer too and so is his mother-in-law and his other family members and they're entitled to preserve whatever assets they might have for the benefit of their family and take full advantage of Medicaid assistance that they also paid their dues to receive.

And "gifting" in this case is subject to the 5 year Medicaid look-back period on asset transfers -- Medicaid takes those gifts into account if they occurred within 5 years, so it's not as if the shifting of assets doesn't have any major consequences for Medicaid eligibility. You can rest assured that Medicaid personnel will make sure you're penniless and all transfers of assets and funds have been taken into account before you receive one dime of Medicaid assistance. Your tax dollars don't appear to be wasted on ineligible and unworthy recipients given the detached, calculating and rule-driven manner in which this program is administered for the most part.

Some of us have pointed out that kneecaps should be broken if the gifting leaves the donor without decent medical care, which could be the result of gifting liquid assets for the benefit of family members, even if these transfers are not taken into account (i.e. they occur outside of the 5-year look back period). Other than that fact, I see nothing here to be repugnant about.

 

[travelover]

Am I the only one who finds the OP's desire to shift assets at the expense of my tax dollars repugnant? There are enough people stealing money from me without someone gaming the system to give $120k to family members so they can get the taxpayer - most of whom will never see $120k in their lives - to pay for eldercare.

The OP should be the one whose kneecaps should be broken.

This subject has come up before and when I expressed similar sentiments, I was accused of "hating all lawyers". But I agree, shifting nursing home costs to taxpayers so you can keep the money is underhanded, unless there is some special reason - like a special needs child in the picture.

 

[ziggy29]

Am I the only one who finds the OP's desire to shift assets at the expense of my tax dollars repugnant?

Morally I think it's questionable. Legally it can be done. If there's sufficient outrage, the response should be to change the laws, not to vilify those who are arranging their financial plans according to the law.

There are certainly a lot of income and asset limitations to Medicaid, the assumption being that if you have more than that, you should be responsible for at least some of the cost of your care. I have a brother who is on Medicaid and SSI, and as a result my mom had to change her will so that instead of splitting her estate N ways for her N children, she will set some aside in a special needs trust for him and split the rest N-1 ways to the rest of us. That's different than the OP's situation since the money was never my brother's to shield from seizure, but it's still using the law in a way to avoid having the state take it all.

The OP should be the one whose kneecaps should be broken.

I don't believe that was really necessary.

 

[kstock]

I'm sure there are many people who don't plan properly and end up in a real bind. This is a great subject.

 

[quietman]

It's not "gaming" if you're playing by the rules and you don't violate the spirit or the letter of the rules.

This however is clearly gaming the system and clearly violates the spirit of the rules, if not the letter. Getting away with it due to technical details staying within the limits doesn't make it right.

BTW: What's with the new guy opening up these old LTC threads and suggesting everyone consult experts?

 

[ChrisC]

This however is clearly gaming the system and clearly violates the spirit of the rules, if not the letter. Getting away with it due to technical details staying within the limits doesn't make it right.

How is it gaming? The rules clearly contemplate transfers -- they merely "recapture" those transfers if made within the look-back period of five years. One can also buy burial policies and prepay funeral expenses and funds transferred for those purposes are also excluded from Medicaid resources, as well. Is it also "gaming" the system for someone to prepay burial expenses in order to qualify for immediate assistance under Medicaid, when the rules clearly contemplate that situation as well?

I think you're confusing someone's motives, and perhaps morally questionable transfers, with rules that clearly permit transfers -- they simply say that if you make the transfers within five years -- the Government reaches back and says the transfers should be counted for Medicaid resource purposes.

This isn't a technical glitch in the system that someone is taking advantage. It's not a loophole or gap in coverage -- it's something that is permitted, period -- and the Government has made the judgment that it does not care about any transfer made before five years of your Medicaid application. BTW, this five year look back period is a major change from the old 3-year look-back period and there are "technical" changes in the manner in which that period is counted that might cover so-called gaming.

Perhaps, this is not something you would do yourself, but countless others are entitled to take advantage of the rules that permit them to do this and certainly it's within the "spirit" of the rules.

 

[youbet]

I'm very much in favor of the increase in the look-back period from three to five years. The incremental two years, IMO, makes it much more likely that the gifter is truly just being generous as opposed to "hiding money" in order to qualify for Medicaid. It was a good change.

As far as folks with significant assets trying to "game" the system by somehow hiding the assets in order to qualify for govt dole funds....... I think they should not just be denied Medicaid coverage but also be stiffly fined just as though they had cheated on their taxes by hiding income.

IMO, we're much too soft on "rule benders."

 

[youbet]

Getting back to OP's original question.......

Reading through the thread it seems that the answer is that the increase in Gift Tax exemption to $13k p/p, p/y does not change the Medicaid five year look back rule. MIL could gift the money, as described by OP, but if she begins NH care the five year look back period will still apply.

Is that it?

The question of whether the kiddies would be morally correct to maintain possession of the money if doing so means Mom receives sub-optimum care is another issue. Some of us feel they should have an "attitude adjustment" if they did so.........

 

[Brat]

My mother had this problem with a grandson she wished to include in her will. The Oregon ARC (may have changed it's name) had a special needs trust to which she could contribute for the benefit of the grandson. This program, or similar programs, doubtless exist in other states.

To establish your own special needs trust is expensive to establish and administer.

 

[ChrisC]

As far as folks with significant assets trying to "game" the system by somehow hiding the assets in order to qualify for govt dole funds....... I think they should not just be denied Medicaid coverage but also be stiffly fined just as though they had cheated on their taxes by hiding income.

IMO, we're much too soft on "rule benders."

Most applicants are already "fined" or stiffly penalized by arcane eligibility rules that virtually made it impossible to "hide" assets if the applicant discloses the required financial information necessary to apply for assistance. I think it is far easier to cheat on your taxes than to cheat on your Medicaid assistance.

 

[youbet]

I think it is far easier to cheat on your taxes than to cheat on your Medicaid assistance.

That's good to hear. Thanks for the info.

 

[Brat]

Not only is it difficult to cheat on Medicaid income/assets, if you do cheat or otherwise loose your eligibility you loose Medicaid (which is usually a lifeline for the participants) for an extended period, and you must apply for Medicaid all over again - a very long process.

Do not gift, or leave assets, to a Medicaid recipient. Even if the recipient rejects the resource once they know about it Medicaid treats it as received.

 

[ChrisC]

Do not gift, or leave assets, to a Medicaid recipient. Even if the recipient rejects the resource once they know about it Medicaid treats it as received.

And the house is basically gone to Medicaid if a surviving spouse applies for Medicaid and acquired sole ownership of the homestead, whether by will or because the property was jointly titled with survivorship rights. Medicaid treats the homestead as a resource -- you leave the homestead for a nursing home and it then has to be sold to cover nursing home expenses -- try gifting the homestead to children -- Medicaid will punish you a long time! You stay in the homestead and obtain homecare assistance -- and when you die, Medicaid will slap a lien on the homestead in your estate for payment of Medicaid assistance.

 

[youbet]

Medicaid treats the homestead as a resource -- you leave the homestead for a nursing home and it then has to be sold to cover nursing home expenses -- try gifting the homestead to children -- Medicaid will punish you a long time!

Again, glad to hear this! Rumors aboud concerning kiddies grabbing Mom and/or Dad's extensive assets and leaving tax payers to foot the bill for their old age care. It's good that's not true per your description of the process.

In our own case here, MIL owns a modest condo (and little else) and has SS as her only income. Our expectations are that Medicaid will wind up footing much of the bill if MIL requires years of NH care but that they will require her assets (in this case a $140k condo) to be liquidated and used in her behalf first. I wouldn't expect MIL to be able to gift the condo to DW and have Medicaid pick up the NH costs from the get-go, although I know many folks do.

 

[Brat]

You might consider selling the condo now and use the proceeds for her care as finding a nice NH that accepts Medicaid at admission may be a challenge. Often care facilities will accept Medicaid after a resident has exhausted their assets. Although my Mother was the exception, most NH residents don't live longer than a year after admission.