Qualifying for MedicaidAfter Making Cash Gifts
By KELLY GREENE
January 27, 2007;PageB2
What are the rules about making gifts and then qualifying for Medicaid help with nursing-home bills?
Last year, my in-laws sold their home and gave my wife and me, and her sister and husband, each a $10,000 gift. My sister-in-law and husband claim this money can't be spent for three years in the event that one of the parents might go into a nursing home. I was under the impression that they could give this gift with no strings attached. Any comment?
-- Jack Zader
New Berlin, Wis.
The family members are free to use the money however they wish. But the parents, if they enter a nursing home, could be left in a bind. That's because the Deficit Reduction Act, enacted last February, significantly tightened the rules for qualifying for Medicaid help with long-term care after making gifts.
First, the basics of applying to Medicaid for help in paying long-term care bills: Individuals typically become eligible for Medicaid after using up all but about $2,000 of their cash and investments. (There are exceptions that vary from state to state, but you generally get to keep your house and car.) One way of reaching that threshold without spending the money is to give it to someone else, often your children.
Some limits on this practice have been in place for years, but the hurdles were fairly low. That changed with the new law, which extended to five years from three years the so-called look-back period, during which Medicaid regulators can consider the role of gifts in deciding whether a patient qualifies for long-term-care help, according to Vincent Russo, a lawyer in Westbury, N.Y., who heads the National Academy of Elder Law Attorneys' Medicaid task force.
In the past, if your in-laws applied for Medicaid assistance for long-term care, a government regulator could examine any gifts made in the past three years and possibly assess a penalty. Now, regulators can look at any gifts made as long as five years before the application, he says.
What sort of penalty do you pay for giving away your assets, then asking for Medicaid help to pay for nursing-home care? The timing on that has changed, too. In the past, the penalty period -- meaning the number of months you would be denied Medicaid assistance because of gifts you made -- started at the time you made the gift. So, for example, under the old rules, if you lived in New York City and a year before applying for Medicaid gave away $27,000, equivalent to three months of long-term care in that area, says Mr. Russo, you would be denied help for three months -- starting at the time you made the gift.
But now, the penalty period starts at the time you apply for Medicaid and are in a nursing home. Using the same example, you could face three months of nursing-home bills with no way to pay for them -- unless the gift recipients bail you out.
So, in answer to the question, no one can force the family members to return the money, but the parents might need those funds.
"If transfers are made, [and if] the in-laws wind up in a nursing home during the five-year look-back period and they don't have any other money to pay the nursing-home bill, one of the options is for the kids to return some of that money that was gifted to them," Mr. Russo says.
One big caveat: States, which partly fund Medicaid, are in various stages of implementing the new law, so you may want to seek a few hours' counsel from a lawyer who specializes in elder care to find out what the current rules are where you live, and how they are expected to change. There are attorney directories at naela.org1 and elderlawanswers.co