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Gifting Money to Your Children AFTER You Have Entered a Nursing Home
There are so many misconceptions surrounding Medicaid with respect to financial gifts, that we thought we would address some of the more frequently asked questions:
Q: “Is it true that under current Medicaid laws, a parent cannot make financial gifts to their children once they have entered the nursing home?”
A: No. In fact, a proper gifting program is a great Medicaid planning technique. At the time an applicant applies for Medicaid, the state will “look back” typically 3 years to see if any gifts have been made. Any financial gifts or transfers for less than fair market value during the three-year look back may cause a delay in an applicant’s eligibility. A proper gifting program requires calculating the penalties prior to making gifts.
Q: “Is $10,000 per year the maximum my mother can give me if she is going to apply for Medicaid?”
A: No. The $10,000 per year gift people ask about when discussing Medicaid Planning is a tax law figure and not relevant with respect to Medicaid’s specific asset transfer rules. The maximum monetary figure Medicaid applicants need to concern themselves with is the “penalty divisor” for their state. The penalty divisor is the state-assessed average cost for nursing home care by which the state assesses Medicaid penalties.
The penalty divisor is $3,497 for South Carolina currently (which may increase this year, 2002, which is why consulting someone knowledgeable in Medicaid law is imperative).
Q: “What if my mother just gives me all of her money to hold on to for her. Can I tell the state my mother does not have any money and qualify her immediately for Medicaid?”
A: Absolutely NOT. Failure to report gifts made by a Medicaid applicant constitutes fraud. Further, let’s say your mother had $21,000 when she entered the nursing home. If she were to give you all of her money in one lump sum, the gift would result in a penalty in South Carolina of 6 months.
Q: “I know that my mother’s house is considered “exempt” under Medicaid laws. Can my mother give me the house without incurring penalties?”
A: No. Any assets which are given away (personal property or real property) are considered gifts. If your mother gave you her home, the state will assess a penalty based on the fair market value of the house at the time your mother transferred the home to you.
There are a number of steps a Medicaid applicant can take to preserve their assets, ranging from gifting strategies, personal care contracts, private annuities, raising the Community Spouse Resource Allowance, etc…. What you need to remember is that the laws are constantly changing and the planning you did for your mother-in-law six months ago may not be proper for your mother tomorrow. Consult a knowledgeable elder law attorney for advice.
Elder Law Today is written by Clemson Attorney, Jackson E. Fields, Jr., Attorney at Law. This newsletter is published as a service of the Fields Law Firm, P.A. This information is for general informational purposes only and does not constitute legal advice. For specific questions, you should consult a qualified elder law attorney. © www.thefieldslawfirm.com
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