Can making a gift before applying for Medicaid save assets?
applying for Medicaid

Can making a gift before applying for Medicaid save assets?

The cost of long-term care is very expensive. Nursing home in NYC have an average cost of approximately $13,000 per month. While $13,000 seems like a meagre sum of money for the rich, it isn’t for the average senior.

Due to the expensive nature of long-term care in the U.S., many American seniors are embracing Medicaid to cover the cost of nursing home care and other long term care. Medicaid, a health care insurance program, is not for everyone.  This program is specifically designed for individuals with low-income, pregnant mothers, adults with disabilities, etc.

How do you protect assets from Medicaid?

Generally, individuals whose income and assets are more than a certain threshold are ineligible for Medicaid. However, is these individuals can protect their assets from Medicaid, they’ll be deemed eligible.

One of the common ways to protect your assets from Medicaid is by setting up a Medicaid asset protection trust. In addition, it is alleged that making a gift before applying for Medicaid is effective in saving ones assets. How true is this? In this article, we are on a mission to find out. But before we do so, let’s digress a bit but taking a look at what Medicaid is.

What is Medicaid?

Medicaid is a public health insurance program that provides health care coverage to specific groups of people, including low-income families, pregnant women, some category of children, disabled adults, etc.

Medicaid is funded by the federal government and the state. It is run at the state level, denoting that coverage, administration, and eligibility vary greatly from state to state. In addition, it available only to individuals and families who meet certain income-based criteria. Recipients of this government-funded program are U.S. citizens, permanent citizens, or illegal immigrants.

Who is Medicaid for?

As said before, Medicaid coverage is not for everyone. This health insurance program is for the following groups:

  • Pregnant women
  • Individuals with disabilities
  • Adults over the age of 65
  • Low-income children including their parents

Can making a gift before applying for Medicaid save assets?

Medicaid eligibility widened to include adults under the age of 65, as long as their incomes is below 133% of the federal poverty level (FPL), as per the Patient Protection and Affordable Care Act. Children make up 38% of enrollees with about 18% of the entire cost.  By comparison, individuals with disabilities made up 14% of enrollees with about 36% of the entire cost.

Making a gift at the inappropriate time could make an individual ineligible for Medicaid. To avoid penalties, gifts would have to be presented five years before a nursing home admission.  Gifts that were initiated before a nursing home admission can be penalized and they are usually subject to a five-year look back penalty period.

A gift that an individual made within five years before making a Medicaid application will attract a sanction period where the amount that was gifted will be used to calculate the appropriate penalty. The penalty is usually in the form of a time-frame or a period of time. During this period of time, the individual will be barred from Medicaid. The timeframe can be a few months or even years depending on the amount of gift made.

With that said, if you wish to make a gift before applying for Medicaid, ensure you do so five years before applying for this program. If you are confused, don’t hesitate to contact an elder law attorney or a Medicaid attorney.

Do you need an Elder law attorney?

If you need an elder law attorney for matters regarding your elderly loved one, don’t hesitate to call our office. Or if you are a senior and you need help with applying for Medicaid, you can also contact us for assistance. In addition, in the event that your assets and income are above the threshold, signaling your ineligibility for Medicaid, you can contact us if you wish to set up a Medicaid Asset protection Trust. However, you must have the Medicaid look back period in mind. This means that, after placing your assets in this trust, you are to wait for the next 5 years before applying for Medicaid to avoid any form of sanction.