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Gifting Assets and Medicaid Penalty

Learn how to plan ahead for the future with assets and Medicaid. Jan. 31, 2022

When planning for the future, you need to think about gifting assets to family and when you should do it. You want to make sure that your gifted assets are done before five years of applying for Medicaid. If you end up gifting assets within five years of applying, you may be subject to a penalty period. This penalty can be eliminated or reduced as long as the assets are returned.

In essence, you can’t move into a nursing home on Monday, gift your assets to your family on Tuesday and qualify for Medicaid on Wednesday. With this, Congress has imposed a penalty for this situation.

The penalty period is determined by dividing the amount transferred by what Medicaid would determine to be the average private pay cost of a nursing home. However, as we mentioned above to reduce or eliminate the penalty period, the transferred assets need to be returned. If the assets are returned entirely, then the penalty period would be eliminated. If only a partial amount of the assets are returned, then it will be reduced.

The money can only be returned from the same person who was gifted the assets. If only a partial amount is returned, it will “cure” half of the ineligibility period and provides the nursing home resident with the funds they need to pay for the care until the remaining penalty period expires.

While returning the funds will mean the Medicaid applicant will most likely have more than they can have on Medicaid, it doesn’t mean they won’t requalify in the future. Before they can qualify, the assets must be paid down. Keep in mind, to qualify for Medicaid you can have no more than $2,400 in countable assets.

If you would like to discuss what is the best avenue for gifting your assets to your family and still qualify for Medicaid, give us a call. We are here to help you with all of your Elder Law issues or concerns.

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