Ask the Expert: Gifts can delay Medicaid

You recently wrote that a husband and wife together can give each child $26,000 a year tax free. If one spouse must apply for Medicaid, how much can the other spouse keep to live on? Do their children have to give back the $26,000? Does the five-year "look-back" apply to this gift or only to transferring a house?

The children don't have to return the money. But if the gift has delayed Mom or Dad's Medicaid eligibility, it sure would be appropriate for their kids to use it to pay for their nursing home care until they qualify for assistance.

Gifts you make within five years of applying for Medicaid nursing home assistance temporarily disqualify you for its help. (This is true only for nursing home benefits, not for Medicaid at-home care.)

To get Medicaid to waive the five-year "look-back," you'd have to convince officials at a special administrative hearing that you made annual gifts as part of a long-established estate plan unconnected with your current Medicaid application, says Bernard A. Krooks, a Manhattan elder law attorney.

To calculate how many months you must wait to be eligible for benefits, Medicaid divides the value of gifts made within the "look-back" period by the average monthly cost of a nursing home in your county. For example, the average monthly cost of nursing home care on Long Island is $11,445 -- so if you gave your kids $68,670, your eligibility is delayed six months.

The five-year test applies to any assets you gave away, with a few exceptions; gifts between spouses don't count. The spouse outside the nursing home can keep up to $109,560. The one receiving Medicaid can't keep more than $13,800.

The bottom line
Gifts made within five years of applying for nursing home assistance delay your Medicaid eligibility.

Click here to read more on the IRS website.