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Mom needs to spend down to get Medicaid.

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The spend-down MUST be spent on items DIRECTLY for mom or dad's or the Medicaid applicant needs or care or property. It cannot be gifted or given to you or others if they do, they could face a "transfer penalty".

What you are likely hearing is that "anyone can gift 12K to others without worry". That is strictly referring to what the IRS rules allow for gifting without tax issues. I think it is more than 12K too. That is IRS rule & NOT MEDICAID rule.

Medicaid is a jointly federal & state needs-based program and the applicant must be able to show that for the past 5 years (with a verifiable trail of documents) that all their money must have been spent on themselves, their care or their owned property. So that they are at the point of being at-need - which is about $ 2K in non-exempt assets and about $ 2K in monthly income (set by each state).

Medicaid is managed by each state. So state law on property, assets, death (estate) makes a big difference. Each state puts it's own spin on Medicaid under an overall umbrella of federal guidelines AND set the exact amount for income & asset ceiling. For example, TX income is set at $ 2,094 (2011) but another state could be higher or lower. Also all real property owned has to be disclosed and the state's database can be accessed by Medicaid to look for any & all property in their or their spouse's name & if it was sold, to whom, for what $ and when.

For example, my mom is in a NH on Medicaid in TX. For her Medicaid application, she ended up submitting 3 years and 6 months of ALL financials plus copies of her funeral, burial, insurance, assessor statements for all real property, etc. Basically anything and everything that could have produced a cash value. Her application was over 100 pages - mainly due to her old-school term NCV life insurance policy. Also we had to get a on letterhead statement from her bank as to ALL accounts closed 3 years prior to her application and the disposition on each account. That was nothing but fun and took about a morning at her bank meeting with a bank VP. So the statement said....CD # 12345 - $ 5,200.43 closed 6/1/09 & deposited to checking account # 56789 on 6/1/09. All her investment accounts - like CD or T bills - went into her checking account (in her name and POD to me) as they were set to expire. It was a clear pattern of where her $ went into. She was in IL before NH and still owns her home, so her checking account showed a clear pattern of where she spent her money that was an acceptable and verifiable spend-down to get to under 2K.

If your person goes and gifts/gives 12K today and applies for Medicaid, next month, next year, etc. it will show up. What is bad about this is, IF that they have moved into the NH or AL facility as "Medicaid Pending". So you all are assuming all is OK for Medicaid: mom is at Pretty Acres NH and all is kum-ba-ya. Then the state will send you a transfer penalty inquiry letter like 5 months after admission. In which you have a very short period of time, to respond with documents as to the funds or assets in ?. If you don't or what you submit is not allowed, then you get a "transfer penalty" letter and the NH get's that too. The transfer penalty is based on your state's reinbursement rate to all NH for the base rate of room & board costs. For TX, it's about $ 145.00 a day that Medicaid pays R & B. So a 12K transfer penalty, would mean you would have to private pay 82 days at the NH. Or mom gets a "30 Day Notice".

Remember the NH gets the penalty letter too, and they will make sure that you or whatever family member has signed off to pay for the penalty period in order for mom or dad to stay at their facility. So 12K would be 82 days someone has to private pay the NH or come to some arrangement with the NH to pay off the penalty. Once they get a penalty, they are toast on getting into another NH too as it will show in the state's Medicaid system.

Really you can't try to get cute with assets and hide or spend incorrectly. Depending on just how much $$ it is, you either want to speak with the business office at the NH; a caseworker with the state or an elder care attorney to come up with a legit & viable plan to do spend down. Personally I'd see an attorney as they are working for you and your interest first & foremost. Also use the $ to get all their legal updated (like a codicil to their will) at the same time too.

If you don't have the time to do a spend down with flexibility (like 5 - 10 years), then you are limited to what can be done correctly & within Medicaid rules.

Good luck. Oh and keep a sense of humor if you can when you do the Medicaid application....you'll need it!
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I agree with everything igloo572 said. Please please please speak to a caseworker in your state for the particulars and you can read the administrative rules in your state on line. In Oregon to get full Medicaid (meaning the person does not have Medicare) total countable assets have to be 2K or under and the income cannot be more than $730.00 per month. It is a welfare program and if the person has 12K in the bank, then that is money available for them to spend on their health and should be. If that 12K out the door, the person could very well find themselves not eligible for Medicaid for the period of time it would have taken to use up that money just like igloo572 was talking about above in paragraph 6. Keep in mind too that once the person passes away, your state's estate recovery unit will be notified and will be seeking reimbursement which includes all assets including real property. I know a family right now who moved into granny's house because granny left it to them and they have been sent a bill in excess of 70K as the state wants their Medicaid money back. Welfare is not free no matter how you look at it.
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OhWeez - the grandkids are dealing with MERP - Medicaid Estate Recovery (or Recoup) Program (or Policy). The state had to come up with regulations on this and put them into effect big time about 2 years ago. We're going to see a lot more of this as the states have to do MERP. Plus some state have now hired outside contractors for it.
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