Mabel's children were concerned that Mabel would need long-term nursing-home care in the near future. It was the holidays, and Mabel always got a lot of joy out of giving money to children and grandchildren. But her children had heard that people in Mabel's circumstances should not give gifts.
The concern is real. For Medicaid to cover the huge expense of nursing-home care, Mabel would have to show that she owned nothing more than around $2,000 (Maine law allows Maine residents an additional $8,000 - for a total of $10,000). She would also have had to show that she had not given away money or assets over the prior five years. That Medicaid rule – the “look-back period” or the “transfer penalty” – would charge Mabel dearly for her generosity. Depending on the size and number of gifts, the penalty could be substantial.
Many people wrongly think that there is no penalty for gifts of up to $15,000 annually. That misunderstanding confuses tax law with Medicaid law (and it also misstates tax law, but that's another subject). The Medicaid rules are entirely different from the tax rules. In the Medicaid context, gifts of any amount that are given during the look-back period can be penalized. (MaineCare rules allow gifts of up to $500 per quarter, but if there is evidence that these gifts were made with an intent to become qualified for MaineCare, they may be penalized.)
There are exceptions to this rule. These exceptions include gifts to spouses, siblings under certain circumstances, disabled children, and children who are caregivers and who live at home with the elder for a span of time. But overall, gifts and Medicaid do not go together. The Medicaid rules are complicated and the consequences for mistakes can be very costly. There are a number of options to protect assets and still qualify for benefits, but these options must be weighed with great care. This is why it's best to consult attorneys who, like us, are qualified by experience and expertise in Medicaid law.
As an alternative to giving gifts of money, perhaps Mabel could make a simple craft or write a special note to her children and grandchildren.
If you have any questions or need guidance in your planning or planning for a loved one, please don't hesitate to contact our Winthrop, Maine office by calling us at (207) 377-6966.