Clients often call me to request that I prepare a deed gifting their home or to discuss gifting other assets, such as cash, to children or other family members. Often, clients are advised by their accountant or financial advisor to make annual gifts to their children for estate tax purposes. These types of transfers are considered gifts under the Medicaid regulations and can have negative implications should you enter a nursing home and want to apply for Medicaid benefits to pay for your care.
While individuals are allowed to make annual gifts in certain amounts without paying gift taxes, these same gifts are not allowed by the Medicaid regulations. The gift tax laws and Medicaid regulations are two different matters and you should be sure you understand all of the implications prior to making any gifts of your assets.
Under the current Medicaid regulations, if within five years of making a gift (the “lookback period”), you need to apply for Medicaid benefits to pay for your nursing home care, you must disclose this gift on the application. There will then be an ineligibility period imposed on you during which you will be ineligible for Medicaid benefits. Furthermore, the ineligibility period would not begin until you were in a nursing home, medically certified to need nursing home care and your assets were reduced to $2,000 for a single individual, or $125,600 (January 2019) combined for a married couple. This means that if you are a single individual, you would not have the funds to pay for the ineligibility period. If you are part of a married couple, your spouse would have to use some or all of the assets he or she is allowed to keep to pay for the ineligibility period. Gifting therefore often has drastic consequences.
Before making any of these gifts, you should schedule a consultation so that you understand all of the implications of making these gifts.