The answer to this person’s question would depend on when she needed Nursing Home care and her health at the time she made the gifts.
Under the Medicaid law, any gifts you make within 5 years prior to applying for Medicaid coverage of Nursing Home costs, are presumed to be for the purpose of depleting your life savings in order to qualify for Medicaid.
If the grandmother did not need Nursing Home care until more than 5 years passed from the date of the gifts, Medicaid would not be able to penalize the gifts.
If the gifts were made within the 5 year lookback period, then in order to avoid the imposition of a transfer penalty by Medicaid, either the gifts would have to be returned or the grandparent must prove that the gifts were for a legitimate purpose and that Nursing Home care was not foreseeable based on her good health.
The law center recently won a Fair Hearing Decision against the Medicaid Agency on this issue of making gifts.
In our case, an 89 year old woman fell and required Nursing Home care. She was in good health before falling. During the 5 years before falling, she made numerous gifts to her son who was in poor health and often unable to work. Her gifts were to help him pay his mortgage, insurance and property taxes along with some household expenses. She also made gifts to her grandchildren to help them with college.
The Medicaid agency penalized those gifts on the grounds that based on her age, an 89 year old should foresee the possibility of needing Nursing Home care. New York State, in its Fair Hearing decision, reversed the County Medicaid agency and held that the gifts were legitimate and not for the purpose of depleting her assets for Medicaid.
Therefore, the Medicaid law does make gift giving riskier for our elderly, but with the right facts, such gifts can be defended.
With a properly designed Irrevocable Family Trust, assets can be transferred to your Trust while you are healthy. After 5 years have elapsed, your Trust assets will be protected. The Trust can then make gifts to your family members after this 5 year period has passed even if you are no longer in good health. Thus, a Trust can be a good vehicle to preserve your gift giving options for your family for the remainder of your life.