Can giving a gift affect Medicaid planning?

by | Jul 3, 2019 | Firm News, Medicaid Planning And Asset Protection |

Many people in New Jersey who are in their elder years want to give their loved ones substantial gifts. This way, they can see their loved one enjoy what would be their inheritance. However, these people may also be planning on utilizing Medicaid benefits to pay for long-term care once they can no longer care for themselves. It is important, then, to understand how gift-giving can affect Medicaid eligibility, so that you can plan accordingly.

In general, to qualify for Medicaid benefits, an applicant cannot have transferred assets of a certain value to another person within the past five years, a period referred to as the Medicaid “look-back” period. If an applicant makes a transfer during that period, that person will be penalized by being ineligible for Medicaid benefits for a certain amount of time. So, giving gifts within the look-back period could be considered a transfer of assets that will be penalized.

However, like many things in life, there are exceptions to the five-year look-back period. For example, transfers can be made to a spouse or to another person if it is for the benefit of a spouse. Transfers can also be made to children who are blind or disabled, or to a trust for the benefit of such children. Finally, transfers can be made to trusts created only for the benefit of a person who is less than 65 years old and is disabled.

In addition, an applicant can transfer their home to certain individuals without being penalized. These individuals include: a spouse; a blind or disabled child under age 21; a trust created only for the benefit of a person who is less than 65 years old and is disabled; a brother or sister who lived in the home the year before the person was institutionalized and who has an equity interest in the house; a caretaker child who resided in the home for a minimum of two years before the applicant was institutionalized and cared for the applicant during that time so that the applicant would not have to enter a nursing home.