Many seniors enjoy being generous to their children by gifting them monetarily. In certain circumstances, however, there is a real concern that people who may be in need of long-term nursing care in the near future should not give gifts. It can be complicated trying to adequately plan for long-term care and consider gifting. We can guide you through the planning and gifting process.
The Medicaid Rule on Gift Giving
For Medicaid to cover the huge expense of nursing-home care, seniors must show that they own nothing more than a statutorily-permissible amount: around $15,500.00 for a single person in New York, and $22,500.00 for a married couple, and no more than $2,000.00 for single person and around $3,000.00 for married persons in New Jersey. In addition, community Medicaid applicants (those intending to remain at home as opposed to permanently relocating to a nursing facility) must also show that they have not given away money or assets over the “look-back period” of prior 5 years (or, 60-months) for New Jersey. In New York, currently there is no lookback period for community Medicaid, but the threshold is being raised to 2.5 years (or, 36 months) as of October 1, 2020. Both States apply the same 5-year look-back period to nursing home Medicaid applications. That Medicaid rule – the “look-back period” or the “transfer penalty” – would charge that senior for their generosity. Depending on the size and number of the gifts, the penalty could be substantial.
Medicaid Law vs Tax Law
Many wrongly think that there is no penalty for gifts of up to around $15,000 of annual exclusion. That misunderstanding confuses tax law with Medicaid law. The annual exclusion applies solely to tax payments. The Medicaid rules are entirely different from the tax rules. In the Medicaid context, gifts of any amount that are given during the look-back period can be penalized. There are exceptions including gifts to spouses and siblings under certain circumstances, disabled children, and children who are caregivers and who live at home with the elder for a span of time. But overall, gifts and Medicaid do not belong together. Reason being is that Medicaid is a secondary payor. It does not begin paying for one’s care until all other sources of payment are exhausted. So it is not uncommon for someone to be on Medicaid while keeping their earned pension with a Labor Union. As such, Medicaid policy is that someone who has funds to make gifts should be using those funds on their own care before Medicaid picks up the check.
The Importance of Consulting an Attorney
The Medicaid rules are complicated and the consequences for mistakes can be very costly. There are a number of options to protect assets and still qualify for benefits, but these options must be weighed with great care. This is why it’s best to consult attorneys who are experts in Medicaid law. Contact our office at 212-920-6371 for more information on long-term care planning, Medicaid and gifting. We have locations in Midtown Manhattan, Brooklyn, and Northern New Jersey.
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