Most people are not aware of gifts exempt from Medicaid penalty. The common belief is Medicaid rules prohibit making gifts when a family member needs nursing home care. Medicaid gifting rules actually encourages certain transfers. Misunderstanding these rules can financially devastate your family.
The annual costs of nursing home care in the Texas metropolitan areas averages $55,625. It’s expensive. Medicare pays very little toward nursing home stays and most people don’t have long term care insurance. Without Medicaid support, you can bankrupt your family paying nursing home costs.
Think of Medicaid as a “safety-net” program for nursing home services. Because it’s a government “program of last resort,” Medicaid steps in but only after the assets of the person needing care have been spent down to a very low limit. Until that point is reached, families must pay using their personal funds.
Handled correctly, gift can speed up Medicaid eligibility, allow you to qualify for Medicaid faster and help preserve a significant amount of resources. You can actually use rules built into the law that allow gifts. Doing so means you legally reduce financial resources to the level required to pay the costs of care.
While some transfers within the five year look back period will cause a delay in eligibility, others will not. Congress wrote the Medicaid gifting rules to encourage certain transfers that support public policy important to the States and the national as a whole.
Three Penalty-Free Medicaid Planning Gifts
For example, transfers of assets are allowed to prevent the impoverishment of a spouse who is living “in the community” (meaning not in a nursing home or prison). Transfers between spouses are specifically authorized and may be necessary for the nursing home spouse to qualify asset-wise.
Yet another penalty free transfer Medicaid allows is to a caregiver adult child. The caregiver child provision says resources can be given to a son or daughter who lived in the care recipient’s home for a minimum of 24 months. For the transfer to be without penalty, proof must be provided that the care provided kept the Medicaid applicant out of the nursing home.
Another rule allows transfers of the patient’s residence without delaying eligibility if that individual’s child is under the age of 21, blind or permanently disabled.
Even Gifts With Penalty Can Make Sense
This article focuses on transfers than can be made without penalty to gain Medicaid asset eligibility. There are other situations where it may make sense to include gifts where a penalty will be assesses.