A sample issue of Elder Law Times - March 2001 Issue

Can Financial Gifts to Children Protect Your Assets from Medicaid?

After her 73-year old husband. Harold suffers a paralyzing stroke. Mildred and her daughter Joan despair over what to do. Dark circles have formed under Mildred's eyes. Her hair is disheveled. Joan holds her hands.

"The doctor says Harold needs long-term care in a nursing home." Mildred says. "I have some money in savings, but not enough. I don't want to lose my house and all our hard-earned money. I don't know what to do."

Joan has heard about Medicaid benefits for nursing homes, but doesn't want her mother left destitute in order for Harold to qualify for them. Joan wants to ensure that her father's medical needs are met, but she also wants to preserve Mildred's assets.

"Can't Mom just give her money to me as a gift?" she asks. "Can't she give away $10,000 a year? I could keep the money for her so she doesn't lose it when Dad applies for Medicaid."

Joan has confused general estate and tax laws with the issue of asset transfers and Medicaid eligibility. A "gift" to a child in this case is actually a transfer and Medicaid has very specific rules about transfers.

At that time Harold applies for Medicaid, the state will "look back" 3 years to see if any gifts have been made. The state won't let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value which are uncovered in the look-back period will cause a delay in Harold's eligibility for Medicaid.

In New Hampshire, for example, every $5,088 given away during the 3 years prior to a Medicaid application creates a 30 day period of ineligibility. So if Harold and Mildred give their daughter $10,000, Harold will be ineligible for Medicaid for about two months.

So what can Harold and Mildred do? There are a number of steps they can take, ranging from proper gifting strategies to personal care contracts (i.e. paying the children for care received), to private annuities, to raising the Community Spouse Resource Allowance. All these strategies and more will be discussed in the upcoming issues of Elder Law Times. So sign up now for your free Elder Law Times Newsletter.