Can Making A Gift Before Applying For Medicaid Save Assets?

Can making a gift before applying for Medicaid save assets?

In New York, making gifts at least 5 years before applying for Medicaid can help save assets. But if the gifting is done within 5 years prior to the application, it will result in a penalty period in which you would not qualify for Medicaid.

That is because New York has a 5 year look back period. In simple terms, the appropriate government agency will look at your expenses during the 5 years before your Medicaid application. If they notice you had made a gift, you will be penalized. The penalty is a period during which you would not qualify for Medicaid benefits. This period is known as the Medicaid Look Back Penalty period.

Medicaid Look Back Penalty period

The look back penalty period is the length of time during which you are denied Medicaid benefits as punishment for having gifted out assets during the 5 year look back period.

The look back penalty period in New York varies according to the value of assets gifted. It is calculated by dividing the value of the gifted assets by the New York Monthly penalty divisor, which is $13,834 in 2021. So if you have gifted $27,700 during the 5-year look back period, your penalty period will be 2 months, i.e $27,700÷$13,834 = 2.

Note that this penalty period is calculated from the date you made the gift and not that at which you filed your application. So simply speaking, if you make gifts worth $27,000 in New York, you would not be eligible for Medicaid for the next two months following the gifting. After the 2 months have elapsed, you may become eligible again.

Why Gifting affects Medicaid application

Medicaid is a government program to help low income or disabled adults to pay their long term care and health care costs since such people would are not able to foot the huge costs themselves. The income limit for singles is $884/month and the asset limit is $15,900. So if you have a lot of money beyond this value or earn a significant income, you may not qualify. The government won’t want to help you foot bills they know you can settle yourself. This means you have to spend your hard-earned money on the high long term care and nursing home costs when you get old.

And this is why people try to reduce their asset limit by spending down. Instead of using up their assets to buy things, some people prefer gifting them to their loved ones. But if you gift out, the government sees you as wealthy enough to handle your costs, so you would be made to pay for your own health care during that Medicaid look back penalty period.

Gifts that are exempted from Medicaid Look Back

The following gifts will be ignored with regards to Medicaid eligibility:

  • Gifts to a spouse
  • Gifts to a child caregiver (Child caregiver exemption)
  • Assets transferred to a special needs trust

How to use gift to save your assets

Gifting, however, is a great way to save your assets but it must be done at least 5 years prior to your Medicaid application. This is a way to bequeath your assets to your loved ones during your lifetime and then having Medicaid pay for your long-term care as you get older.

Nonetheless, gifting would also attract taxes known as gift tax if not done right, and these taxes can cut deep into your estate. Proper planning would need to be done in order to avoid huge costs while leaving the most of your estate to your loved ones.

Our New York Elder Law Attorneys can help

There are multiple rules that affect gifting strategies. It becomes important you seek the guidance of a professional New York elder law attorney to protect your best interests and your assets.

You shouldn’t wait until you are ready to be put in a nursing facility before making plans. You have to plan long before that time (at least 5 years) in order to save your assets and protect your loved ones. Our elder law attorneys can assist you.

Our elder law attorneys are proficient in Medicaid planning and will help you strategize towards Medicaid eligibility and appropriate gifting.

Call us to get all your questions answered.


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