• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
  • Services
    • Asset & Business Planning
    • Dental Practice Law
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Medicaid and Elder Law
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Coping With Alzheimer’s
    • Emergency Medicaid & Nursing Home Planning
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Veteran’s Benefits
  • Resources
    • DocuBank
    • Elder Law
      • Elder Law & Medicaid Definitions
      • Elder Law Reports
      • Elder Law Resources
        • Carmel, Indiana Elder Resources
        • Fishers Indiana Elder Law Resources
        • Greenfield, Indiana Elder Law Resources
        • Greenwood Elder Resources
        • Indianapolis Elder Law Resources
        • Lawrence Elder Law Resources
        • Plainfield Elder Resources
        • Zionsville Elder Law Resources
    • Estate Planning
      • Estate Planning Checkup
      • Estate and Gift Tax Figures
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Asset Protection Planning
        • Business Succession Planning
      • Elder Law
        • Medicaid
        • Medicaid Planning
        • Planning for Long-Term Care
      • Estate Planning
        • Avoiding Estate Taxes
        • Frequently Asked Questions for Families Without an Estate Plan
        • LGBTQ Estate Planning
      • Financial Planning
      • Incapacity Planning
      • Legacy Wealth Planning
      • Pet Planning
      • Probate
      • Power of Attorney
      • Trusts
        • Trust Administration
        • Serving as Executor
      • Wills
    • Newsletter
    • Pre Consultation Form
    • Probate and Trust Administration
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss Of A Loved One
      • Probate Resources
        • Carmel, Indiana Probate Resources
        • Greenfield Probate
        • Greenwood Probate
        • Indianapolis Probate
        • Plainfield Probate
        • Indiana Probate
        • Zionsville Probate
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
  • Reviews
    • Our Reviews
    • Review Us
  • Areas We Serve
    • Boone County
      • Lebanon
      • Zionsville
    • Hamilton County
      • Carmel
      • Fishers
    • Hancock County
      • Greenfield
    • Hendricks County
      • Brownsburg
      • Plainfield
    • Johnson County
      • Franklin, Indiana
      • Greenwood
    • Marion County
      • Central Indiana
      • Indianapolis
  • Blog
  • Contact Us

Frank & Kraft, Attorneys at Law

Indianapolis Estate Planning Attorneys

CONNECT WITH US TODAY(317) 684-1100

Attend a Free Workshop
Home » Estate Planning Articles » Medicaid Gifts to Children

Medicaid Gifts to Children

August 31, 2016

Compliments of Our Law Firm,

Written By: The American Academy of Estate Planning Attorneys

At some point during your retirement years there is a very good chance you (and/or your spouse) will need long-term care. There is also a good chance that you will need to qualify for Medicaid benefits in order to cover the high cost of that care. Qualifying for Medicaid can be a complicated process given the complex eligibility guidelines. The asset transfer rules, in particular, are a source of much confusion for applicants. While it is always best to consult with an experienced Medicaid planning attorney if you foresee the need to qualify for Medicaid, you may also benefit from knowing the answers to some basic questions regarding Medicaid eligibility, asset transfers, and gifting while participating in the Medicaid program.

Can an applicant transfer assets to an adult child in anticipation of the need to qualify for Medicaid?

No, not without incurring a penalty. Medicaid uses a five-year “look-back” period when determining an applicant’s eligibility. The “look-back” provision allows Medicaid to review an applicant’s finances for the five-year period prior to applying for benefits. Asset transfers made during that time period for less than fair market value will be flagged and the value of the asset effectively imputed back into the applicant’s estate. This, in turn, will cause the applicant to incur a penalty period before being eligible for benefits.

Are gifts of up to $14,000 per year excluded from the Medicaid transfer rules?

No. This is a common source of confusion. The $14,000 per year figure refers to the I.R.S. annual exclusion rule that allows a taxpayer to make gifts valued at up to $14,000 per year to an unlimited number of beneficiaries without incurring gift taxes. The Medicaid asset transfer rules are completely unrelated.

How are asset transfer penalties calculated?

As a Medicaid applicant or recipient, the figure you need to be concerned with is the “penalty divisor” for your state. The penalty divisor is the average cost of a month of nursing home care in the state and is used when calculating your penalty period if your assets exceed the program limit. Penalties are calculated by dividing the value of the amount transferred by the penalty divisor. For example, if you gifted your vacation house valued at $100,000 to your daughter you would incur a penalty of about 20 months if the divisor were $5,000 ($100,000/$5,000). Keep in mind that the penalty divisor is subject to change as the cost of nursing home care changes.

Can my mother just give me all of her assets to hold and tell Medicaid she has no assets?

Absolutely not. Whether your mother calls it a “gift” or not, Medicaid will consider it an asset transfer and failure to report asset transfers constitutes Medicaid fraud. Moreover, the gift would incur a penalty period during which your mother would not be entitled to benefits. If she accepted benefits anyway during that time period she could be required to repay them. The bottom line is that there is no easy way around the Medicaid asset transfer rules nor the five-year “look-back” period.

Since my mother’s house is considered an exempt asset by Medicaid, can she give me the house without incurring a penalty?

Maybe. The fact that the asset is an exempt asset for Medicaid eligibility purposes is not sufficient to avoid a penalty. In most states, all asset transfers while receiving Medicaid are potentially subject to a penalty. There are, however, certain transfers that may not incur the penalty. Your mother may be able to transfer her house, without incurring a penalty, to the following people:

  • Her spouse
  • Her child who is blind or permanently disabled
  • A trust for the sole benefit of anyone under age 65 and permanently disabled
  • Her child who is under age 21
  • Her child who has lived in her home for at least two years prior to your mother moving to a nursing home and who provided your mother with care that allowed her to stay at home during that time.
  • A sibling who already has an equity interest in the house and who lived there for at least a year before your mother moved to a nursing home.

The best way to avoid penalties is to include Medicaid planning in your estate plan well before you enter the five-year “look-back” period. Since that is not always possible, the next best thing is to make sure you consult an experienced Medicaid planning attorney before you apply for Medicaid and certainly before you make any asset transfers. Your attorney can help you develop a gifting strategy that will minimize any potential penalties you might incur.

Primary Sidebar

Frank & Kraft, Attorneys at Law

Download our free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

Where We Are

Frank & Kraft Attorneys at Law
135 N. Pennsylvania Street Suite 1100
Indianapolis, IN 46204-2485
Phone: (317) 684-1100
Fax: (317) 684-6111

See Larger MapGet directions

Office Hours

Monday8:00 AM - 5:00 PM
Tuesday8:00 AM - 5:00 PM
Wednesday8:00 AM - 5:00 PM
Thursday8:00 AM - 5:00 PM
Friday8:00 AM - 5:00 PM

Map

frankkraft_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
footer-logo

Frank & Kraft Attorneys at Law
Attorney Advertisement

© 2022 American Academy of Estate Planning Attorneys, Inc.

© 2022 · American Academy of Estate Planning Attorneys, Inc. | Disclaimer | Privacy Policy | Sitemap | Contact Us