For those who plan on receiving Medicaid long-term care benefits, it is crucial that you understand how gifting away money or property can interfere with your eligibility.
Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid you will be ineligible for a period of time (referred to as a transfer penalty); the length of time will depend on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $14,000 (as of 2017)without having to pay a gift tax, Medicaid law will still treat that gift as a transfer.
Any transfer will be scrutinized in terms of Medicaid eligibility. For example, Medicaid does not have an exception for charitable giving. Thus, it’s important to keep in mind that giving money to charities can potentially affect your future Medicaid eligibility. Gifts for holidays, weddings, birthdays, and graduations can all cause a transfer penalty. Even giving a friend a gift could result in a transfer penalty.
While most transfers can be subject to the penalty, there are a few exemptions. Even after entering a nursing home, you may transfer any asset to the following individuals or entities without having to undergo a period of Medicaid ineligibility:
- Spouse
- A child who is blind or permanently disabled
- A trust for the sole benefit of anyone under the age of 65 who is permanently disabled
You can also transfer your home to the following individuals without triggering the transfer penalty (including those listed above):
- A child under the age of 21
- A child who has lived in the home for at least two years prior to your moving to a nursing home and provided you with care allowing you to remain at home for that period of time
- A sibling who already has an equity interest in the house and lived there for at least a year prior to you moving into a nursing home
We understand the importance of providing for loved ones and proudly serve the residents of Rhode Island in their estate planning needs. Call or email us at 401-369-8534 and [email protected].
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