What "gifts" will be a problem with Medicaid?

Why not just do the honest, moral thing and spend mom's money on mom's care? Rather than stiffing the taxpayers? Why would people think that stiffing the taxpayers is morally OK? One thing if there were no money, but since their is, do the right thing.

There are no IRS tax consequences for gifts in excess of the maximum allowable annual amount. For 2020, $15K to anyone can be excluded from reporting to the IRS. Taxpayers can give out as much as they want to as many as they want and not report these gifts to IRS as long as each gift is $15K or less. So, if grandma gifts granddaughter $25K, only $10K must be reported to IRS for the tax year in which it was made. Since grandma is doing the gifting, her income tax forms that year should include reporting $10K to granddaughter ($10K being the amount over the allowable annual $15K exclusion for 2020). IRS has forms for reporting gifts in excess of the allowable exclusionary amount. While gifts in excess of the annual exclusionary amount must be reported on the return of the one making the gift, there’s no tax due from the one making the excess gift until the sum total of reportable excess gifts in one’s lifetime goes over $11.8 million. IRS just wants to keep track of the total gift amount made in excess of the excluded, annual allowed amount. Most of us will never pay a gift tax, nor will our estate pay a gift tax on the excess amounts, as long as our lifetime reportable gifts don’t reach the $11.8 million figure. The IRS was very helpful when my dad passed, as I was unaware of this info. During my dad’s last few years, after my mom had passed, he put me on as co-owner on his bank accounts, including CD accounts. He also made me Co-owner of his co-op unit. All of those were counted by the IRS as gifts he made during the taxable year he made them (IRS counts 50% of the value of each account or real estate property as the gift amount when it’s a co-ownership gift. Since he made all those gifts in one year, he went over the exclusionary annual limit. Those gifts were never reported on his tax return in the year he made them, as we were ignorant. After my dad passed, I had to go back (as executor of his estate) and submit an amended tax return for the year he put me on as Co-owner to his accounts and property. IRS realized this was a good-faith effort to correct a situation where my dad was ignorant, so his estate was not charged a penalty for late reporting. In order to amend his tax return, I had to contact the banks to figure out the account balances when he put me on as Co-owner. I also had to locate real estate comps for the value of his unit when he made me co-owner. All those figure had to be reported on the gift tax forms. Big headache, but IRS was very helpful. My dad was not a millionaire and the total of his lifetime reportable gifts was under the lifetime amount allowed before a gift tax is assessed. So, there was no gift tax to be paid. Very confusing for folks - essentially IRS expects annual reporting of gift amounts in excess of the exclusionary allowed limit. But there’s no actual gift tax to be paid until one goes over the lifetime accruable umpteen-million dollar limit.

As to dealing with a five year look-back on gifts prior to qualifying for Medicaid, the $25K gift will count against grandma. My neighbor’s ex-husband gave their daughter $20,000 for college as part of a decades-ago legally-drawn joint custody agreement when they divorced. My neighbor agreed to no monthly alimony payments while she had primary custody of their daughter if her ex agreed to pay their daughter’s college expenses when she turned eighteen. He (the dad) ended up in skilled nursing care within less than five years after she used his funds for college. The daughter was told she had to pay back those funds in order for her dad to qualify for Medicaid. My neighbor appealed the decision on behalf of her daughter because the legal custody agreement went back much further than five years. Medicaid decided in this case that the daughter did not have to pay back her father’s funding of her college tuition. Essentially his gift was documented as having been made decades earlier in the financial custody agreement.

It will not be your daughter that will have to repay.

What happens is that Medicaid places a transfer penalty on your moms LTC Medicaid application. And for more fun in this, the date the penalty period starts is based on the date that mom files her Medicaid application AND NOT the day of the transfer of the 25k.

Transfer penalty is basically a math problem - a division equation but based on details unique to your states Medicaid program.

Here’s my understanding of it: Each state has fixed $ amount it pays each day for room & board to LTC facilities for Medicaid beds. Some states, esp southern ones, pay a pretty low rate abt $160 a day. While upper E coast ones pay double that rate abt $275/$300 a day. Amount set by your states legislature. Let’s say it’s $185 R&B day rate.

if mom gifted $ 25,000.00 that’s the dividend.
$185.00 is the divisor. 25k by 185 = 135 DAYS (quotient), 4.5 months of private pay due BEFORE Medicaid eligibility kicks in.

Yeah it’s a penalty by DAYS of ineligiblity. Not $ 2 $ penalty.
Penalty period - again - starts day 1 from which LTC Medicaid application filed. Keep in mind, that to file LTC application, they have to be in the NH. They are already a resident there so they are building up a bill each day. Remember if they filed for Medicaid they are impoverished. They have no $ other than 2k max in nonexempt assets.

If they were admitted “Medicaid Pending” then all they are paying while application gets evaluated is their monthly income (like SS $) copay to the NH. But once a penalty has been determined, Medicaid sends out correspondence to the applicant, thier DPOA. And ALSO TO THE Facility. In quick time, the facility will expect all $ due from day 1 at private rate to be paid to them ASAP or mom will get a 30 day Notice. They will Bill DPOA or whomever in the family that they can. It’s really important that you read in minute detail the admissions contract and pay attention as to how you sign each & every page to limit your exposure on this. Over & over on this site there’s posts from family who get billed for various reasons from the NH.... in the rush to get mom placed, in the drama with hospitalization, in dealing with family conflicts, etc., you are just oh so glad you got mom into a place, you just sign the paperwork and don’t get a copy of all pages. If mom moves out due to eviction, the bill still exists and will be turned over to collections. NH does not have to bill at lower Medicaid day rate either, although I think you could negotiate on this if your a real pittbullie personality.

So knowing all this, would moms gifting 25large be the thing to do???
Ignoring morality, it could be, if your ok on risk.
Risk that mom dies before ever needing Medicaid.
Risk that daughter will have income in 3, 4, 5 yrs to pay grannies 4.5 months of private pay rate NH & she will gladly pay the penalty.

I will say this, if mom insists on doing this, try to get her to do it as a up & up loan, so its done as a Promissory Note & drawn up by an atty.

Also if you think daughter won’t be able to uphold agreement to pay, I’d suggest that you get an attorney to do a caregiver contact between you & mom, and every cent Mom pays you as per caregiver contract goes into a new bank account that you will draw from to pay the penalty should mom have to apply to Medicaid before 5 years + 1 month lookback. Mom ought to do a caregiver contact or rent agreement with you whatever the case, but bank the $ to have to deal with penalty. Unless $ is of no object for you.

DON’T Let her gift the money. If your mother gives away $25k and has to go to in to a nursing home within the next 5 years, she won’t pass the 5 year look bad so *someone* in the family will have to pay for the nursing home. Also, You are unfortunately in the one state in this country that enforces filial law so you very well could end up financial responsible for your mother if she can’t qualify for Medicaid.

This would be a VERY BAD IDEA. Yes, this is just the kind of a gift that will count in a lookback. At 91 she cannot afford to do this. She should leave this amount to your daughter in her will, that meaning, house won't be bought for a few years. This is definitely something your Mom must not do. Anything given will count as a gift for the purposes of medicaid lookback. If you are talking about gifts to individuals and how they will count for taxes, anything she gives to any individual over the amount currently of 15,000 would result in tax payment by your Mom. Please tell your Mom that she is not now in a position to be gifting people. If you wish to charge your mother for room, board, care, etc. that contract can be drawn up between the two of you in a lawyers office. Then that is reportable by YOU for taxes. Your mother can pay for reasonable rental, utilities, groceries and care. Then should YOU wish to give your daughter a "gift" you could do so, the fund would be coming from you, but your Daughter would understand it was coming from grandmother.
This isn't my area of any expertise so basically I am reporting to you thinks I have learned from Margaret or Igloo of Mstbil or Cali here as far as medicaid is concerned. I will caution your mother to make no gifts without first understanding all about it. I hope some of the above mentioned will chime in here to give you more, likely better information. But for now, full stop until you understand the rules. And feel free to call medicaid office, which is basically medicare office for all intent and purpose at 1 800 medicare. Long wait but they are helpful.

Do not let her gift that money!!! My father never gave me anything but then decided he wanted to help out my kids with college. I should have known no good deed goes unpunished. Had he given them the full amount up front there wouldn't have been an issue but he had to dole it out a nickel at a time. After they are in school he decided he wants to go to AL and the money goes fast. Too late to expect the kids to change their educational choices...which they made based on the promised gift. At the time none of us even knew what Medicaid or a 5 year look back was. I was more concerned with the limit for the irs and gifting. Then I learned we could end up in deep doodoo because of this 'gift'. Can't tell you how many sleepless night I had worrying he would outlive his money and we'd have to find a way to pay back money no one had.

Talk to a lawyer to draw up a Medicaid Promissary Note. The note wont be discharged at death but you set the interest rate to little like a few cents a month and it does not affect Medicaid.

If she wants to help your daughter, have daughter work for it with a contract to be paid for what daughter can do for her. But, absolutely do it legally, see an elder law attorney.

Is your mother still in charge of her own finances? If the answer is 'yes' then it's within her rights to withdraw money from her own bank accounts. You say in your profile that soon you will be moving to Florida and since your mom lives with you, she will be moving to Florida with you. If you're out of the state of PA, then you won't have to worry about filial laws there. You nor any of your family will be held responsible for her bill if some time down the road she has to go into a nursing home if she's not going into one in the state of PA. The state of Florida does not have filial law. She should now start withdrawing a few thousand dollars at a time in cash from her accounts. Literally in 100 dollar bills. Then in the event that she has to go into a nursing home and they start asking what this money was withdrawn for tell them you don't know. Tell them she liked to gamble. Or take trips. Or support charities. Nursing home racket likes to scare and shakedown elderly people and their families into thinking that they have to hoard every penny of their life's savings otherwise they won't be taken care of IF they get to the point where they need long term in-patient care. $25,000 will get a person about two months or so in a nursing home because they know every average middle-class person will have to go on Medicaid to pay that ridiculous sum. $25,000 is nothing to a nursing home. It is everything to your daughter though because she can get a house. I say do it. Or you can have your mom buy the house for your daughter, put it in both their names, but do it in a survivorship deed. Your daughter would only be responsible to hand over the value of your mom's half should she have to go on Medicaid for a nursing home. Or a property can be bought and put into an Irrevocable Trust for your daughter. This means that as long as your daughter is living there and doesn't try to sell it, your mom can still go on Medicaid is she needed to. Your daughter would owe Medicaid if she sells the place. Speak with a lawyer who specializes in elder law and estate planning. Run these ideas past them. Talk to more than one though to get different opinions and see what they say.

At her age she could well need Medicaid before the 5 yr look back ends. Your Mom should use her own money for her future care not as gifts. Gifting could make her ineligible Medicaid.