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‘Gifting’ May Be Penalized By Medicaid

March 11, 2014

Filed under: Gifting,Medicaid,Nursing Homes,Spending Down,Trusts — Neel Shah @ 4:44 pm

While people can “gift” up to $14,000 each to anyone they want to each year without tax penalty, that tactic is not going to fly if it is being done to “spend down” in order to get Medicaid to pay for nursing home care.

Centers for Medicare and Medicaid Services (Me...

Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)

If a person is “gifting” money to family or friends in order to spend down to reach the resource limit for Medicaid nursing home coverage, it better be done five years ahead of time, according to an article in the New York Daily News.

Gifts made within five years of applying are likely to disqualify the gift giver from obtaining coverage for a period of time based on how much was given. The larger the gifts, the longer the wait.

Medicaid will presume the gifts were made to get around the criteria for coverage.

The penalty period is likely to be in place even if the gifts were put into a trust.

Because Medicaid planning and the use of trusts is complex, the article suggests consulting with a qualified estate planning or elder law attorney.

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Planning Now for the Potential of Alzheimer’s Later

December 11, 2013

Filed under: Incapacity Planning,Long Term Care,Medicaid,Spending Down — Neel Shah @ 9:00 am

More and more senior Americans are forced to deal with the devastating diagnosis of Alzheimer’s. Without planning, an Alzheimer’s diagnosis can be a devastating financial blow to an individual and his or her family. A recent article discusses how individuals can take control of their financial futures by planning now for the potential of an Alzheimer’s diagnosis later.

One potential way through which a person can get funds to pay for medical care is through Medicaid. Medicaid is a need-based program, so a person must meet certain income requirements to apply. If a person is above the threshold to receive Medicaid, he or she must spend-down assets in order to qualify. However, the spend-down of assets must be done carefully,with the oversight of an estate-planning attorney. Importantly, Medicaid employs a look back provision that will disqualify certain distributions of wealth if they occur within five years of a person’s application for Medicaid.

Often, Alzheimer’s patients require more care than Medicaid will cover. One option to fill the gap is through long-term care insurance. These insurance policies provide broad coverage for care received in a patient’s home, assisted living facility or nursing home. It is important to get long-term care insurance early, as rates go up as a person ages. Additionally, it may be difficult to find an insurer after a diagnosis of Alzheimer’s.

Considering Gifting Your Home? Read This Before You Give Away The Castle.

December 4, 2013

Filed under: Gifting,Home Protection,Life Estate,Medicaid,Spending Down — Neel Shah @ 9:00 am

Many parents want to believe that their children would never kick them out of their own home. However, the sad reality is that this has been the subject of more than one lawsuit. As a recent article explains, if you are considering gifting your home to your child or children, it is important to consider that possibility and other consequences.

First, the gift of a home is often a taxable gift. If a parent signs a deed gifting the house to their children, he or she should file a gift tax return as well. If this gift tax return is not filed, the parent may lose the ability to claim an exemption from the gift tax and may owe taxes on the transaction.

Additionally, gifting a house to children allows them to sell the house out from under the parent. The children can attempt to send the parent to a nursing home or simply evict the parent altogether.

Finally, gifting a home can have serious implications as far as Medicaid is concerned. Medicaid is a need-based program that employs a look-back provision of five years. Therefore, if a home is gifted within the five year period before a parent applies for Medicaid, the value of the home is considered in the parent’s assets. Therefore, depending on the value of the home, the gift could make the parent ineligible for Medicaid benefits.

Often, the ideal scenario involves a system whereby the value of the home is gifted, but the parent is permitted to live in the home for as long as they like or for a certain period of time.  Parents should consider using a combination of life estates and proper trusts to achieve these goals.

‘Spending Down’ for Medicaid Coverage: A Cautionary Tale

October 16, 2013

Filed under: Aging In Place,Elder Law,Long Term Care,Medicaid,Spending Down — Neel Shah @ 9:00 am

Medicaid is a need-based public benefit program that assists citizens in paying for medical care. Therefore, a person can only receive benefits if he or she meets certain income criteria. In order to meet the criteria, many people attempt to spend down their assets. However, if not done properly, a ‘Medicaid spend-down’ could have disastrous consequences. A recent article tells the story of Eugene Shipman, who ran into trouble after attempting to spend down his assets to qualify for Medicaid.

Centers for Medicare and Medicaid Services (Me...

Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)

Shipman and his wife, Arline, began the spend down process in April of 2008, so that Arline would qualify for Medicaid coverage for her anticipated and impending care needs. As part of this spend-down, Eugene disinherited her in his will executed in March of 2009. Following the drafting of the will, Arline’s son, David – who exercised her power of attorney – disclaimed any inheritance from Eugene on her behalf.

Then, in 2010, Eugene unexpectedly passed away. Arline’s attorney scrambled to file a petition to claim an elective share of Eugene’s estate on her behalf. When the trial court denied the petition, Medicaid got involved and asked the court to reconsider. Luckily, the appellate court revoked the disclaimer and granting Arline the elective share.

Had the court determined that the disclaimer should not be revoked, not only would she have lost her Medicaid eligibility, but she would have also missed out on half of Eugene’s estate. The story of Eugene and Arline should remind individuals that they must seek competent counsel and take caution when involved in a Medicaid spend down.

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