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Exception to the Medicaid Penalty: Gifting to a Loved One in Need

It is generally known that if you make a gift to your child (or pretty much anyone, with a few exceptions) and then need to go into a nursing home within five years, Medicaid will penalize you for the gift.

The general rule is that if you (or your spouse) need nursing home care within the next five years, Medicaid will be made aware of the gift during the application process as part of the “look back”.  Medicaid will then almost certainly assess a penalty, which is a period of time that you are not eligible for Medicaid, based on the amount of the gift.

Exception to the General Rule:

If a gift (transfer) was made for a purpose “exclusively other than to qualify for Medicaid”, then no penalty period is to be assessed.  The problem that we encounter with Medicaid applications and transfers made during the lookback period, is that Medicaid generally takes the position that all transfers were to qualify for Medicaid.  The burden then shifts back to the applicant to prove otherwise.

This is not easy to prove and is very fact sensitive.  There are a number of factors to consider, including the age and health of the applicant.

Example:

I recently was successful at a Fair Hearing involving one of these cases.  A couple helped their daughter through a rough financial time a few years ago.  Unfortunately, the wife (who had mild dementia around the time of the gifts) needed to go into a nursing home about 2 years later.

At the hearing, we were able to demonstrate that the parents made these gifts to help their daughter and had nothing to do with Medicaid or asset protection planning.  The daughter was able to provide documentation to support our assertions that this was for a purpose exclusively other than to qualify for Medicaid, including copies of checks she wrote to creditors and to pay other bills and expenses.

Situations like these can often be complicated and should be reviewed by an experienced elder law attorney as soon as possible.  Each case is different and no outcome can be guaranteed.  But with the right set of facts, and appropriate supporting documentation, you have a chance.

 

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