Critter Corner: Would a Graduation Gift to my Son Affect my Mother’s Medicaid Eligibility?

Dear Raider,

My son recently graduated from high school. My mother wants to give him a monetary gift of $1,000. She is in the early stages of dementia and may need nursing home care in the not-so-distant future. Would giving this gift affect her Medicaid eligibility?

Thanks for your help!

Ella Jability

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Dear Ella,

Congratulations to your son on his graduation!

To answer your question, although it is true that some gifts will disqualify a person from receiving Medicaid for a specific period of time, there are extremely important exceptions and extremely complex Medicaid rules that apply.

Medicaid has a look-back period of 5 years that immediately precedes the date of one’s long-term care Medicaid application. All uncompensated asset transfers, including (as a general rule, graduation gifts, birthday gifts, Christmas gifts, wedding gifts, paying for a wedding, paying for a grandchild’s education, etc.) during this timeframe are examined to ensure that assets were not given away or sold for less than fair market value during that time period. If they have been, it is assumed it was done to meet Medicaid’s asset limit and to be eligible for Medicaid. Violating this rule can result in a penalty period of Medicaid ineligibility.

Gifts given for special occasions can be seen as a violation of Medicaid’s look-back rule, but not always. Here are some things you should know:

• If you can prove that the intent of the gift was for another purpose, the gift may not be considered a violation of the look-back period. For example, if a Medicaid applicant writes a check to their adult child every Christmas and has done so long before the 5-year look-back period, this could serve as proof that the gifts weren’t given for the purpose of meeting Medicaid’s asset limit. This likely wouldn’t work with a one-time graduation gift, so she should definitely err on the side of caution.
• In Virginia, for example, up to $4,000/year can be gifted (as long as there is documentation that there has been a pattern of gift giving, such as for birthdays or for Christmas or Hanukkah, for a minimum of 3 years prior to Medicaid application). Consult with an experienced Medicaid Asset Protection attorney for more details about gift giving rules.
• Maryland has a much more generous set of rules regarding gifts that are clearly not intended to qualify for Medicaid.
• DC also ignore certain de minimis gifts, but there are no clear guidelines issued by DC Medicaid, so we prefer to err on the side of caution.
• Even small gifts can result in a period of Medicaid ineligibility.
• The Federal Gift Tax Exemption does not apply to Medicaid gift giving. Unfortunately, some people mistakenly believe that it does and unknowingly violate Medicaid’s look-back rule. Please see our article on the dangers of gifting which examines this topic in greater detail.

Depending on the person receiving the gift and the type of gift, gifts of any amount may be just fine under your state’s Medicaid rules.

When dealing with or trying to understand Medicaid eligibility, be sure to always work with an experienced elder law attorney, such as Evan Farr and team, when it comes to Medicaid Asset Protection.

Hope this helps!

Raider