If you’re looking to help out your grandchildren financially, or simply wish to be generous, you may be wondering how gifting money could affect your eligibility for Medicaid long-term care benefits down the road. The short answer is that gifting can make you ineligible for Medicaid for a period of time due to the program’s asset transfer rules. However, there are certain allowances and strategies to be aware of.
The Medicaid Look-Back Period
To receive Medicaid coverage for nursing home care, assisted living, or in-home care, there are strict limits on the amount of assets you can have. This is because Medicaid is a needs-based program intended for those with limited resources.
Any gifts or asset transfers made within a specified “look-back” period before applying for Medicaid can trigger a penalty period of ineligibility. The federal look-back is 60 months (5 years).
*Side note: Although Medicaid is a federal program, the rules in each state vary. While all states implement the 60 month look-back for nursing home Medicaid eligibility, and most for community based services (including home care and assisted living care) as well, historically, New York did not have a look-back for community-based services. In 2020, New York State enacted a 30 month look-back but has delayed implementation and as of this writing, there is no definite date of its implementation for community based services.
So if you gift cash to your grandchildren, that amount gets totaled along with any other assets you’ve transferred during the look-back. Medicaid then determines how long you’ll be ineligible based on the transfer amount.
For example, let’s say you gift $112,000 to your grandkids, and the Medicaid nursing home regional rate in your county is $14,000. Your ineligibility period, the “penalty period,” would be around 8 months ($112,000 / $14,000 per month). Medicaid will not seek the penalty from your grandchildren, but you will have to figure out a way to come up with paying the nursing home privately during the penalty period before Medicaid begins to cover your bill.
There is a misconception that gifts under the federal annual gift exclusion amount would not be penalized by Medicaid. For 2024, the amount of the federal annual gift tax exclusion amount is $18,000. For example, some people believe that if they give $54,000 to three grandchildren this year, it won’t affect their Medicaid eligibility. That is not true. The IRS federal gifting rules are very different than the Medicaid penalty rules. Read more here.
Careful Planning is Key
While gifting to grandkids can be penalized for Medicaid purposes, if it is your wish to continue gifting while protecting your assets for Medicaid eligibility, there are strategies that an elder law attorney can develop for you.
Getting advice from an experienced elder law attorney is highly recommended to understand the complex rules and protect your eligibility.
Reach out to us, we would love to begin to help you.
