For Medicaid purposes, a “gift” is an uncompensated transfer of assets or the transfer of an asset for less than its fair market value. Some things that you may not think of as a “gift” may be treated as such by Medicaid. This may significantly affect Medicaid eligibility if the transfer is made during a look-back period.

Presently, there is a 5-year “look-back” period, during which the government will examine all transfers of assets in assessing the Medicaid applicant’s financial status. Any gifts or asset transfers during this 5-year period could result in the imposition of a penalty period during which the applicant would be ineligible to receive Medicaid benefits.

Examples of some transfers that Medicaid will treat as a gift include:

• Withdrawals by a joint account-holder from a joint bank account.
• Putting the title to a house into joint names with someone else.
• Buying certain kinds of annuities – the law has become complex in this area, so some purchases will not trigger a penalty, but many will.
• Lending money if the promissory note does not meet certain criteria, or if the applicant forgives the loan in a Will.
• Failure by the applicant to take the “statutory share” of the estate of his/her spouse – to “elect against the Will.”
• Distribution from a living trust established by the applicant or spouse upon the death of either one, if the other person requires long-term care.
• Disclaimer of an inheritance.
• Buying a “life estate” if the applicant does not live in the property for at least a year.
• Selling something below fair market value.
• Any transfer made by the applicant’s spouse before Medicaid is awarded may be treated as if it were made by applicant. (Special rules apply if both spouses require long-term care.)
• Transfers made on behalf of either spouse by a Conservator, under power of attorney, etc., will be treated as if made by the applicant.
Many asset transfers, including some outright gifts, have innocent explanations and the Medicaid applicant can attempt to prove that the transfer should not result in a penalty period. For instance, if the applicant can establish the gift was not made for purposes of Medicaid planning then it should not cause a penalty. If the applicant made a gift when living independently, within his/her means, while in reasonably good health, and for reasons that can be established, even a significant gift may be allowed without the imposition of a penalty. As one might expect, the burden falls upon the applicant to present convincing evidence that the asset was transferred exclusively for some reason other than to become eligible, or to retain eligibility, for Medicaid

If you or a loved one anticipates relying on Medicaid for long-term care, planning ahead can provide options to preserve assets and expand your choices. We would encourage contacting our office for a complimentary consultation that will help you plan for the peace of mind you deserve.