You must be careful when gifting assets to lower the value of your countable assets to qualify for Medicaid. Below are questions our attorneys are often asked by individuals and families as they begin preparing for long-term nursing home care.
What Assets Can I Keep?
In order to qualify for Medicaid benefits, your countable assets must not have a total value of more than $1,500. However, not all of your assets are countable for Medicaid purposes. Assets that will not count toward the $1,500 limit include:
- Pre-paid funeral expenses
- Burial plots
- Most household goods and furnishings
- Some life insurance policies
- Your home (if occupied by an eligible family member)
- A vehicle (only in limited circumstances)
An experienced nursing home planning attorney can help you determine which assets you can keep and qualify for Medicaid benefits.
When Should I Make Gifts?
Any gifts that you make within five years of your Medicaid application could result in the denial of your application, unless the gift falls within one of the narrow exceptions to the gift rule. Furthermore, if you transfer an asset for less than 90% of the market value of the asset, Medicaid will apply an improper transfer penalty to the amount of the gift.
You must “cure” the gift and wait until the penalty period is over to become eligible for Medicaid. Therefore, it is important to begin nursing home planning as soon as possible. Our Medicaid attorneys will help you develop a plan that follows Medicaid gift rules and that is in your best interest.
What Are The Tax Consequences Of Making Gifts?
You are free to give gifts or money in any amount to anyone. Although you may be subject to a federal gift tax, chances are this will not occur. During 2015, one may make lifetime gifts of over $5.4 Million before any gift tax would be due. This is rarely a consideration when doing Medicaid planning. However, you may have to file a gift tax return and declare the gift if that gift exceeds $14,000 in a year to one person.
How Much Can I Give Away In A Gift?
Legally, your gift can be in any amount; however, as discussed above, if the value of the gift exceeds the IRS guidelines, it will be subject to the duty to file a gift tax return, and if you are extremely wealthy and give away more than $5 Million, then gift tax could be due.
Who Should Make Gifts and Who Should Not Make Gifts?
Nursing home planning and Medicaid gifting can be a complex and complicated issue for many individuals. The decision between who should make gifts and who should not make gifts is something that you should discuss with an experienced nursing home planning attorney. Your situation may be very different from another person’s situation; therefore, you should not base your decision on what another person did while he or she planned for long-term nursing home care.
Do You Have More Questions About Medicaid Gifting?
If you have questions about nursing home planning and spending down assets to qualify for Medicaid, Lovett & House, Attorneys at Law can help. Contact us for an initial consultation. We’ll answer your questions and provide legal counsel so that you can make an informed decision regarding preparing for long-term nursing home care.