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By John R. Merlino Jr. Esq.
Founding Attorney

There are many seniors who find joy in giving financial gifts to children, grandchildren, and loved ones. While the generosity is something that both the giver and receiver of such gifts can greatly enjoy, there are other considerations that must be taken into account before an older individual bestows such generosity on someone else. Here, we will examine the danger and possibly unanticipated negative impact on long-term planning coverage options for those who make financial gifts.

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

If you may be in need of long-term care, such as a nursing home or other facility, in the not-so-distant future, making gifts can jeopardize critical benefits coverage for what can be a really substantial expense. This is due to the Medicaid rule on gift-giving. You see, for Medicaid to provide coverage for the substantial cost of nursing home care, the Medicaid applicant must show that he or she has resources that fall below the statutorily-allowed amount. Medicaid is, however, aware of the danger of having some people gift away resources so that they qualify for Medicaid benefits. To limit this, Medicaid has instituted a “lookback period.”

As of October 1, 2020, New York has a look-back period of 2.5 years or 36 months for community Medicaid applicants. These are applicants that are looking to remain at home for care as opposed to a permanent relocation to a nursing facility. Community Medicaid applicants must be able to show that they have not given away or “gifted” money or other assets during the look-back period. Furthermore, those who apply for Medicaid nursing home benefits are subject to a 5 year look-back period.

For unauthorized gifts or transfer of assets during the look-back period, the applicant will be penalized. Essentially, the applicant incurs a penalty for making gifts during the look-back period. While the exact penalty will vary depending on the size of the gifts as well as the number of gifts, the penalty could very well be substantial. There are, however, exceptions to gifts that would lead to a Medicaid penalty. Under certain circumstances, a person may make gifts to a spouse, siblings, and children who are caregivers and live at home for a certain amount of time, without penalty, even if it occurred during the look-back period.

Unfortunately, many people misunderstand and misconstrue the Medicaid look back penalty for gifts. Often, it is confused with the federal gift tax exemption. Gifts made during the tax year are tax-exempt up to a certain amount. This, however, is a tax law exemption and is not part of Medicaid law. Despite a gift being exempted from tax consequences by falling below the annually allotted gift tax exemption, the gift can still lead to a penalty regarding Medicaid benefits if it was during the look-back period.

Elder Law Attorneys

If you may need long-term care in the coming years, talk to our office before you make any gifts or give away any assets or other property. We do not want to see your generosity penalized and impact your Medicaid eligibility. At Merlino & Gonzalez, our elder law attorneys provide trusted legal counsel on these issues and more. 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.