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  • Writer's pictureAmber Hinds

Medicaid Planning and Gift Giving: What You Need to Know

Updated: Dec 5, 2022

For many across the US, the first snow has already fallen and Christmas is in the air. Or, at least, that’s what people tell themselves as they try to adjust to dropping temperatures. Winter is here and with it the biggest gift-giving season of the year. For those who rely on Medicaid for their long term care insurance, extra caution needs to be exercised lest they inadvertently disqualify themselves from the program by giving a little too generously.

When the Government Plays the Grinch

Yes, however unfestive, it’s true that giving too much over the holidays can make you Medicaid ineligible.

Medicaid employs a 5-year look back when assessing applicants for the program. This means that when determining whether you meet the asset and income limits that serve as qualifying criteria, the program reviews your last five years of financial transactions to ensure no improper transfers were made.

Improper transfers involve a lot of things and not even Christmas gifts are exempt. Here’s a breakdown of what Medicaid looks for.

  • Gifting assets (including cash, cars, real estate, stocks, etc.) to a person who is not an exempt recipient.

  • Selling an asset for less than fair market value.

  • Adding a person’s name to a real estate deed or financial account.

  • Purchasing a non-Medicaid compliant annuity.

  • Loaning money to a loved one without a Medicaid-compliant promissory note.

  • Refusing an inheritance left to you by a loved one.

Even small financial gifts can leave you without long term care insurance and so if you depend on Medicaid, it is crucial to speak to a professional when making your Christmas lists this year.

What About the Federal Gift Tax Exemption?

The federal government provides an annual tax exemption that allows you to gift loved ones a limited amount before incurring tax penalties. In 2022, the cut-off was $16,000 per person which, yes, does mean, you can give numerous gifts of this amount penalty-free. However, this has nothing to do with Medicaid.

While the federal government (in collaboration with states) administers both Medicaid and tax collection, rules concerning the two don't overlap. You may not incur a tax penalty by making a generous financial gift this Christmas, but that doesn’t mean you won’t jeopardize your ability to qualify for Medicaid.

Ensuring You Have Long Term Care Insurance When You Need It

Medicaid planning is full of pitfalls. Apparently innocuous transactions (like giving Christmas gifts) can inhibit your ability to gain long term care insurance when you need it which, in turn, can have staggering financial consequences. The cost of in-home or nursing home care is beyond what most middle-class families can afford which is why it is important to work with an experienced Medicaid advisor when seeking to qualify for and retain coverage.

To learn more about protecting your Medicaid eligibility this holiday season, do not hesitate to reach out to AshBer either by using the contact form on our website or by calling us at (888) 441-1595.

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