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When faced with a nursing home bill of approximately $8,000 per month, many people wish to obtain Medicaid benefits to pay for this care. In order to obtain Medicaid benefits, an asset limit must be met; therefore, assets valued above this amount must be reduced to the asset limit before benefits will be granted.
In their efforts to reduce the excess assets, many people believe that they can gift the excess assets due to the gift tax exclusion explained in Myth #2. However, while a person can make a gift of up to $13,000 per person in 2010 without filing a gift tax return, the Medicaid program is not governed by the gift tax rules.
The Medicaid program imposes a penalty when any assets are given away within 5-years of the application for benefits, except in very specific circumstances. This penalty results in being unable to obtain Medicaid benefits for at least 5-years after such a gift is made. Thus, a gift of any amount will typically result in a penalty being imposed even if the gift does not have to be reported on a gift tax return.
Gina M. Barry, Esq.
