Gifting and the 5 Year Look Back Period for Medicaid Nursing Home Benefits: Eight Tips
For individuals applying for Medicaid (also called MassHealth) to pay for nursing home care, you must provide information about gifts made within the past five years. If gifts are made within five years of applying for Medicaid to pay for nursing home care, a penalty period will be imposed. A penalty period means that Medicaid won’t provide coverage for a certain period of time, depending upon the amount of the gift.
Gifts are considered any asset that was transferred for less than fair market value, such as cash, vehicles, real estate, etc.. Medicaid can ask you to provide all financial records for the past five years, providing an explanation for any transfers, withdrawals or deposits over $1,000, including receipts and bank statements.
If you or your spouse are over 65 years old, to avoid problems with the five year look back period please consider the following tips:
1. Keep receipts and bank records for all transactions of $1,000 or more made within the past five years. For example, if you buy a car, furniture, or go on an expensive vacation, keep the paperwork from the purchase, in case it is needed. If you transfer money between accounts, you should keep records to prove this.
2. If you frequently withdraw large amounts of cash (more than $900), MassHealth will want to know what you purchased and will require receipts.
3. If you are a gambler, you should keep records of your wins and losses, and any receipts you may have.
4. Occasional gifts of less than $800 are unlikely to be scrutinized. For example, if you make a gift to a family member or a friend for a wedding, birthday, Christmas, graduation gift, etc., it is unlikely to cause a serious problem in my experience.
5. Many people get confused between the IRS gifting rules and the Medicaid gifting rules. The IRS currently allows you to make a gift of $15,000 per person per year without requiring you to file a gift tax return (even though it is unlikely that you will actually owe any tax unless you have given away extremely large amounts of money in the past). However, Medicaid will consider a gift of $15,000 per person per year to be a disqualifying transfer of assets, resulting in a penalty period.
6. If gifts are returned to you, the problem can be resolved. However, the recipient of a gift has no legal obligation to return it.
7. If you make a very large gift of over $600,000, the penalty period could actually go beyond five years, which means that you will have to wait until the penalty period has expired before MassHealth will provide benefits to you. This is why it is extremely important that if you have made large gifts you wait to apply for Medicaid benefits for at least five years, unless you know that the recipient can return the money or property to you.
8. There are exceptions to the five year look back for transfers between spouses, caretaker children, disabled persons, or to a sibling who lives with you and has an equity interest in your home. To take advantage of these exceptions you will need further guidance. We are available to assist you.
Based on the law, the penalty should only apply to those that made a gift within five years of applying for benefits, who did so with the intention of qualifying for MassHealth benefits. However, in reality, Medicaid rarely accepts this argument. In most cases, MassHealth will impose a penalty period for gifts made within five years of applying for benefits, regardless of the reason for the gift.
If you are considering making a gift or plan to apply for Medicaid and need advice on how to deal with past gifting, call our office at 617-489-5900 or schedule a brief free consultation or by clicking: https://seniorsolutions.as.me/FreeConsult
Senior Solutions, Attorneys at Law, is an Estate Planning and Elder Law firm, serving the Greater Boston, Massachusetts area, since 2001. We are ready to help you with Medicaid Planning, Estate Planning, Probate, Guardianship & Conservatorships, Special Needs Trusts, and Fiduciary Services.