Medicaid Gifting

February 8th,2011 marked the fifth year anniversary of the Deficit Reduction Act (DRA), under which the eligibility rules for qualifying for Long Term Care Medicaid drastically were changed. The DRA made two major changes to the eligibility rules. First the DRA changed Medicaid’s “look back period” from three 3 years to five 5 years. Second, the DRA changed the start date of the penalty period from the date the gift was made to the date of the Medicaid application. These changes have caused hardships on many families seeking to gain assistance for the long term care of their loved ones.

Gifting is especially problematic under the current rules applied for seniors seeking long term care benefits under Mass Health. Massachusetts strictly enforces the five year gift look back period. Therefore if a senior gifts funds or property within five years of applying for nursing home assistance through Mass Health, a penalty period will be assessed not at the time of the gift but at the time of the application for eligibility.  The penalty period will cause the senior to “re-pay” the total of all gifts made during the past five years.

For example, what if granddad paid $10,000 for college tuition for his granddaughter, gave his car valued at 2,000 to his grandson and gifted $13,000 to his son over the last five years. He was healthy and competent when the gifts were made. Granddad has a stroke and must be placed in a nursing home. He has no further assets. Under current Massachusetts laws granddad will be rendered ineligible for Medicaid until he “re-pays” the total of $25,000 in gifts made over the look back period. There would be a dollar for dollar penalty wherefore Medicaid/Mass Health would not start paying the nursing home until $25,000 of nursing home charges has been incurred. This leaves the senior, his family and the nursing home in a fix.  How can granddad be able to pay $25,000 or any amount for five years of total gifts? Granddad was just being generous, he was not thinking of nursing home issues. The recipients of the gifts may have to pay them back. But the grandkids are not establish and cannot afford this. Therefore most of the burden would fall on the son.

What can be done about this problem? Well the Medicaid laws do allow for a hardship exemption. This exemption allows that transfers made when the senior was healthy and had no expectation that he would need nursing home care to be exempt.

The problem is that Massachusetts law does not give any clear guidance to hardship waivers and such waivers are rarely given and almost never given without an expensive appeal hearing. Currently there are bills in the Massachusetts legislature which would clarify when the Medicaid agency can issue hardship waivers. These bills would clarify the confusion over the innocent transfer of assets and provide mechanisms to streamline the waiver process. If anyone is interested in learning more of these bills and their house and senate docket numbers, please give me a call or e-mail me for more information. It is important that our legislators support bills to protect our seniors.

I also want to clarify an issue I frequently encounter in this area of gifting. A family member will make a bold statement, “Mom or Dad can give away 10,000 (actual IRS gift exclusion is $13,000) without any consequences”. While it is true that for the Internal Revenue Service that a gift under $13,000 per year to each recipient is a non-taxable  event, this does not apply to the DRA rules. Medicaid does not follow or honor the annual gift tax exclusion. Every gift is counted no matter how large or small.

So how does a senior plan. Do they stop gifting? But when? Only the Lord knows when a Medicaid application would be needed. So no one knows when the five years would start. Also gifts to charitable organizations are also deemed to be ineligible transfers. What if a senior makes a donation to his church?

Planning for possible Medicaid benefits is highly confusing and complex. There are legal avenues to guide families through this process. Again since no one knows when the look back period will be triggered early planning and knowledge of resources is crucial. The Law Office of Paul Kolesnikovas can assist families and the senior develop a strategy of planning for eligibility and minimizing or eliminating eligibility penalties and liens.

Remember the family with a plan to cover elder care costs is ahead of the majority with no plan. Call to have Attorney Kolesnikovas review the status of  seniors in your family to develop a comprehensive plan.

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