Many people are confused by the differences between the tax rules governing gifting and Medicaid eligibility. “They are separate, but gifting can have an impact on eligibility,” said attorney Greg Bonney.
A person and their spouse can each give $14,000 a year to as many individuals as they wish without being required to file a gift tax return. Additional money may be gifted for medical or educational expenses.
The difficulty comes when funds are gifted within five years of an application for medical assistance, commonly called Medicaid, for nursing home services. Even gifts to charity are scrutinized if given during those five years.
“There is a presumption that the gifts were made in order to qualify for Medicaid,” Bonney said. “Medicaid will not cover nursing home costs for the number of days the gifted amount could have paid for the person’s care (currently calculated at the rate of $243.49 per day in Wisconsin).”
Unless you are able to convince the state that the gifts were given for reasons other than making you eligible for Medicaid, a gift of $14,000 would make you ineligible for Medicaid for nearly 58 days ($14,000 divided by $243.49).
There are some exceptions, however. For example, spouses may gift between each other. Parents also can make gifts to a child who is blind or disabled and transfer funds to a trust for a child who is disabled and younger than age 65.
If an exception does not apply, you or the nursing home could apply for a Medicaid Hardship Waiver. If the Waiver is approved, the state could seek reimbursement from the person or charity receiving the gift.
Information provided by Greg Bonney, Partner, Johns, Flaherty & Collins, SC. For an estate planning lawyer in La Crosse, call him at 608-784-5678.