Frequently Asked Questions
Can Outright Financial Gifts to Children Jeopardize Eligibility For Government Benefits?
THE SHORT ANSWER IS YES, IF NOT HANDLED CORRECTLY!!
After her 73 year old husband, Harold, suffers a paralyzing stroke, Mildred and her daughter, Joan, consult an elder law attorney. Dark circles have formed under Mildred’s eyes. Her hair is disheveled. Joan holds her mother’s hand.
“The doctor says Harold needs long term care in a nursing home,” Mildred says. “I have some money in savings, but not enough. I don’t want to lose my house and all our hard-earned money. I don’t know what to do.”
Joan has heard about Medicaid benefits for nursing homes, but doesn’t want her mother left destitute in order for her father Harold to qualify for them. Joan wants to ensure that her father’s medical needs are met, but she also wants to preserve Mildred’s assets for her mother.
The Family’s Questions
“Can’t Mom just give her money to me as a gift?” she asks. “Can’t she give away $13,000 a year? I could keep the money for her so she doesn’t lose it when Dad applies for Medicaid.”
The Correct Response
Joan has confused general estate and tax laws with the issue of asset transfers and Medicaid eligibility. A “gift” to a child in this case while maybe not taxable, is actually a “transfer” and Medicaid has very specific rules about transfers.
At the time Harold applies for Medicaid, the state will “look back” 3 years to see if any transfers have been made. The state won’t let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value which are uncovered in the look back period will cause a delay in Harold’s eligibility for Medicaid.
In Illinois, for example, every $6,000 given away during the 3 years prior to a Medicaid application can create a 30 day period of ineligibility. So, for example, if Harold and Mildred give their daughter $30,000, Harold will be ineligible for Illinois Medicaid for 5 months (30,000 divided by 6,000). What if Joans lose the money (gambling, drugs, lawsuit, divorce etc.)? Instead, there are a number of safer steps that Harold and Mildred can take, ranging from proper gifting strategies using trusts (that protect the assets from the kids’ creditors), to personal care contracts (i.e. paying their adult children for care received), to raising the Community Spouse Resource Allowance(CSRA). All these strategies and more will be discussed in upcoming issues of our Elder Law Update.
PS: Mr. Ferraro will be holding a FREE workshop titled “Don’t Go Broke in a Nursing Home” on March 11th & 18th, 11am and 6pm on both days! Call our office at 847-292-1220 and ask for Jennifer to make your reservation TODAY!
Long Term Care Planning Attorneys
The “3 Phase” Lawyers
Legal Counsel Assisting You in the 3 Phases of Your Life:
– Maturing Years – Will, Trust, Taxes, and Asset Protection
– Senior Years – Long Term Care: Pre-Planning and Crisis Planning
– Post Death Years – Estate, Probate, and Trust Administration
“Educate to Motivate”
Anthony B. Ferraro
The Law Offices of Anthony B. Ferraro, LLC
The Estate & Trust, Elder and Asset Protection Law Firm
Columbia Centre I
5600 N. River Road, Suite 764
Rosemont, IL 60018
PH (847) 292-1220
FAX (847) 292-1221
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