The Greatest Financial Risk for Seniors: Paying for
Long-Term Care – Part XI (The Medicaid Gifting Rules)
In my experience as an elder-law attorney over the past 18 years, I find that many seniors and their families continue to have misconceptions about the Medicaid “gifting” rules. So here are a couple of common misconceptions we see in this regard.
I can think of a couple of reasons why this misconception is so widespread:
Here is a correct statement of the Medicaid gifting rule:
“If you have made any gifts:
then you will be ineligible to receive Medicaid payment to cover your nursing-home care for a period of time. That period is calculated by dividing the total non-exempt gifts you made by the average cost of a nursing home in your state at the time you file the application.
A few examples should be helpful to show how this rule works in practice.
Example #1. In Pennsylvania the average cost of a nursing home for 2019 is $10,420.14 a month, but to simplify this explanation let’s assume it is exactly $10,000. So if the total gifts you made during the look-back period is $40,000 (for example, $2,000 a year to each of your five children over the past four years), then your ineligibility period would be 4 months ($40,000 divided by $10,000). The rationale for this Medicaid rule is essentially the following: “You chose to give $40,000 to your children. There’s nothing wrong with doing that, but if you hadn’t made those gifts that $40,000 would still be in your bank account, and you could then have used that money to pay for 4 months of nursing home care. So don’t expect to get the tax-payers to cover the cost of your care for the next 4 months.”
Example #2. Four years before applying for Medicaid, an elderly woman sells her home to her son for $75,000. The fair market value of the home at the time of sale was $125,000. The Medicaid Office would view this as a gift of $50,000; that is, she sold her home for $50,000 less than its value. So she would be ineligible to receive Medicaid for the next 5 months ($50,000 divided by $10,000).
Example #3. For a period of 8 years, a great aunt gave her great niece a total of $7,000 each year, totaling $56,000. However, because the look-back period is 5 years, it is only the gifts made during the past 5 years that are counted. So $7,000 a year times 5 years = $35,000, and with the average cost of a nursing home $10,000 a month, great aunt’s period of Medicaid ineligibility will be for 3.5 months ($35,000 divided by $10,000).
Note: Under the current Medicaid rules, the ineligibility period begins to run not on the date that the gift was made, but on the date that you become “otherwise eligible” for Medicaid – that is, the date you meet all of the other requirements for Medicaid (your doctor confirms that you need a nursing-home level of care, your money is down to just a few thousand dollars, and you have filed a Medicaid application). In other words, it’s the date you would have been eligible for Medicaid had you not made any gifts. For example, if you put your house into your children’s names on August, 5th, 2016, but didn’t become “otherwise eligible” for Medicaid until March 16th, 2018, your period of ineligibility will begin on March, 16th, 2018.
Next month’s article will continue this discussion of the Medicaid gifting rules.
The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney.
Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But it is more true than ever that “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.
Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at email@example.com. The Law Offices of Schellart Joyce, LLC has an Internet presence at www.losscaleselderlaw.com.
Note: This is not a good way to protect your home (see Parts VII, VIII and IX of this series). ↑