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By John R. Merlino Jr. Esq.
Founding Attorney

To many, gift-giving is a love language. It can bring so much joy to give someone a gift. There are, of course, some added benefits of gift giving that you may get, such as tax benefits and reducing the size of your taxable estate, among other things. If you are planning for long-term care, even as far into the future as 5 years from now, however, gift giving should be thoughtfully done as it can have some serious consequences on your plans to cover the cost of long-term care through Medicaid benefits eligibility. The majority of people in the U.S. will need some kind of long-term care at some point in the future so this is really an issue that almost everyone should be aware of.

The Danger of Gift Giving When It Comes to Long-Term Care Planning

Medicaid benefits can be critical in paying for long-term care, but there are strict eligibility requirements to qualify for Medicaid, most prominent of which are the strict limitations on assets a Medicaid beneficiary can have to be eligible for benefits. Medicaid is referred to as a “payer of last resort.” This means that Medicaid will pay for long-term care after all other avenues of payment have been exhausted. Many people mistakenly believe that they will have to lose a lifetime of savings to nursing home costs before qualifying for Medicaid. With the proper planning techniques, such as employing trusts the right way, this does not have to happen.

You cannot, however, give away your assets as gifts in order to qualify for Medicaid benefits. Should you gift away assets, you may be subject to a penalty period in which you will be ineligible for Medicaid benefits for a certain time frame after you apply for Medicaid benefits. While New York, among most other states, does not enforce such a penalty period on home care Medicaid covers, it can impact benefits intended for nursing homes and assisted living facilities.

Back in 2005, the Deficit Reduction Act established a five-year lookback period for Medicaid application purposes. This means that gifts, with certain exceptions, made within five years prior to applying for Medicaid benefits will be penalized and lead to a period of ineligibility in which the applicant will have to spend down savings and assets to cover long-term care expenses. Exceptions to this bar against gift-giving and asset transfers within the five-year lookback period include gifts made of exempt assets, such as cars, and other specified household goods and furnishings. Exceptions are also made for gifts made to a spouse or a disabled child.

It is important to be mindful of the potential pitfalls of gift-giving and how it can impact your plans for covering the costs of long-term care. The length of the period of ineligibility will depend upon the amount gifted to another and will begin when a person applies for Medicaid and would have qualified if not for giving the gift in question.

Estate Planning Attorneys

Do not wait to put a long-term care plan in place. The sooner you do so, the more options you have at your disposal. If you need long-term care coverage right away, crisis planning may be available, but your options will be much more limited. To learn more, talk to the knowledgeable team at Merlino & Gonzalez. Contact us today.

About the Author
John is a fierce advocate and the office guru for problem-solving and brainstorming. He guides clients through every stage of a real estate transaction from offer to contract, navigating through nerve-shattering home inspection and title clearance concerns, maintaining constant contact with lenders, conducting the actual closing, and continuing to advise clients with regard to any post-closing concerns.  John brings a practical and fair-minded approach to the process which has earned him the respect of his clients and peers.