In MA you can give $13,000 each year to a child. What if a parent gives the gift and enters a nursing home. The parent pays nursing home costs for 2 years while, also, gifting 3 children $13,000 each year. Will the IRS "look back" and say that money needs to be used for nursing care?
"If an individual gives away money or property during the five-year look-back, it triggers a penalty period during which he or she is ineligible for government aid.
The penalty period equals the amount given away divided by the average cost of nursing-home care in your area. So, for example, if you give $60,000 to family members and a nursing home costs $6,000 a month where you live, you can't qualify for Medicaid for ten months."
A. The gifting rules are very harsh. If you simply give away money or assets in an attempt to impoverish yourself and obtain Medicaid benefits, IT WILL NOT WORK! If you give away any assets within the look back period of FIVE YEARS prior to making a Medicaid application, Medicaid will impose a penalty period during which you WILL NOT BE ELIGIBLE FOR MEDICAID. The penalty period corresponds to the number of months for which could have paid for the nursing home if you had kept the assets instead of giving them away.
B. For example, if you gave away $50,000 within the look back period, Medicaid would divide the $50,000 gift by the average cost of one month in the nursing home (as determined by Medicaid) to determine how many months of ineligibility it would cause. The current number is $5247 (this number changes periodically), so a $50,000 gift would cause a 9.5 month penalty period ($50,000/$5247 = 9.5). Even worse, the penalty period only starts after you are out of money and would otherwise be eligible for Medicaid, and you apply for benefits. Then, for the NEXT 9.5 months you can't get medicaid AND you have no money to pay for the nursing home. This is a very big problem, and you must plan for it.
C. The nursing home can discharge you if you have no money and Medicaid refuses to cover your costs because of a penalty
A certified estate planner or an elder law attorney can provide guidance on preparing to qualify for Medicaid.
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