Why is it illegal to give my grandchild some money for their graduation to help pay for college if I want to apply for Medicaid? I thought you can make a gift of $15,000 a year without any penalty?
Medicaid eligibility can be complicated, especially when an individual has had adequate financial means all of their life but now are facing the cost of long term care options. It is not illegal to give monetary gifts, however, depending on the circumstances, it might make someone ineligible for Medicaid for a period of time. The Medicaid rules provide that a person can be disqualified for giving away property. When someone applies for Medicaid, they must disclose any such actions involving gifting of money or property.
The State will “look back” at least five years to investigate if any assets have been given away, the action known as divestment. Transfers of property or money, including sales for less than market value made during the lookback period may cause a divestment penalty period. During the penalty period, Medicaid will not pay for long term care in the home or a long term care facility, even if the applicant has no money. It depends on what is given away, to whom, and when.
In terms of being able to make a gift of up to $15,000, this is a rule under federal gift tax law, which refers to how much per year a person may give to another without liability for gift tax. The gift tax has nothing to do with Medicaid. Many people then ask, does this mean one cannot make any gifts five years before going into a nursing home? Who can anticipate when that might happen? What about birthdays, holidays, weddings and graduations? Medicaid rules make no exception for such gifts.
If, for example, you were to give your grandchild $1,000 for college, knowing that you are in the process of, or about to apply for Medicaid, it would be viewed as divestment. However, if someone gives someone $1,000 gift for graduation or a birthday, and a year later has a stroke and has to go into a nursing home, this might or might not be considered divestment. These sorts of cases migh require a formal appeal hearing before the application would be approved. It is always best to consult an elder law attorney who specializes in Medicaid law when facing decisions about financial resources and applying for Medicaid.
Turning 65 and new to Medicare this year?
It can be daunting to consider Medicare options, especially with all those letters and the terminology. Let Region IV Area Agency on Aging and MMAP (Michigan Medicare/Medicaid Assistance Program) help with our free virtual “New-to-Medicare” class on August 25, from 1-3pm. You will learn: the difference between original Medicare and Advantage Plans; when is the best time to enroll and when you can make changes to your coverage; if you qualify for valuable premium savings programs; and how to protect yourself against Medicare fraud. Individuals have a full seven months to make Medicare choices — three months before turning 65, one’s birth month, and the three months after turning 65. Let us help with unbiased healthcare information at no cost to you. For more information, contact our MMAP Regional Coordinator at 269-408-4354.