Are you an Alabama senior? Do you enjoy giving gifts of money to all your loved ones during the holidays? Be aware that as you get older you may need to be careful about giving monetary gifts. In fact, there is an elder law risk when you make monetary holiday gifts. We would like to explain why as you continue to read our blog.
To begin, did you know that monetary gifts can impact Medicaid eligibility? The fact is, if you needed to apply for Medicaid in the next five years, your gift giving could have significant consequences. The impact of monetary gifts could be on both the giver and receiver.
Now in regard to the gift giver, you need to know that the IRS allows a tax-free annual gift per person with an unlimited amount of donees. You need to know that this relates to tax law planning, not for Medicaid eligibility.
Next, you need to know that Medicaid takes a different stance on gifting. To be eligible for Medicaid a person’s assets are reviewed and depending on the state, there is a “Look-Back” period of sixty months. If it is found that the Medicaid applicant gifted money, or made an uncompensated transfer, in order to be eligible for Medicaid, the penalty can be Medicaid ineligibility. The length of time of ineligibility is determined by the amount of the gift and the average cost of a private pay nursing home in the area.
Now, there may be some options for the person deemed ineligible for Medicaid due to gift giving. The gifter could collect the gift back, or reimbursement, in order to “undo” the penalty. Even if possession of the money makes the gifter ineligible for Medicaid, he or she can spend it down by temporarily paying for long-term care or making a home modification related to his or her disability until he or she reaches eligibility status. There may also be a possibility of an undue hardship waiver, if Medicaid ineligibility will cause the person to go without medical care, food or shelter.
In addition, there may be important impacts on the gift receiver. All states have an asset limit to be Medicaid eligible and it is not very high. Even a small gift can push a potential Medicaid recipient over the eligibility limit.
Fortunately, with the assistance of an experienced Alabama elder law attorney, a potential Medicaid recipient has some options if he or she receives a gift. For example, he or she may be able to pay off debt, purchase a funeral plan or a Medicaid eligible annuity. If money is received before applying for Medicaid, the money can also be spent down in a similar way.
Contact our office to discuss your options if you will be giving or receiving money or other assets this holiday season and anticipate this may impact your Medicaid eligibility. At the end of the day, legal planning is not just for you. Instead, it is for the ones you love most. If we can answer any questions for you on putting this estate planning in place, please do not hesitate to let us know. For more information, please reach out to our office and schedule a time to meet.