Holiday Gifts and Medicaid Penalties

As we enter the holiday season the topic of gifts and how holiday gifts interact with nursing home Medicaid eligibility often comes up. Surely the government is better than The Grinch Who Stole Christmas and would not penalize our senior citizens for making harmless gifts to family members for the holidays or other special occasions, right?

Wrong.

Gifts are gifts when it comes to Medicaid transfer and penalty rules. There are no exceptions recognized for holiday gifts. There are no exceptions recognized for birthday gifts. There are no exceptions recognized for wedding gifts. There are no broad exceptions recognized for gifts to children or grandchildren. There are some very narrow exceptions for properly structured educational gifts, transfers to minors, and transfers to a disabled child; however in order to not be penalized you must be able to prove the transfer meets all of the criteria set forth in the law and regulations. If one mistake is made, the transfer may not be exempt.

Nominal Amounts

The existing Medicaid law gives the government the authority to impose a penalty for a gift of any amount. However, as a policy decision the HHSC (as of this writing) does not go through transfer penalty procedures when the total amount of all transfers per month is $200 or less. You will notice the limit is for all transfers in a given month, not per person or recipient.

Does this mean you should start making gifts of $200 per month in an attempt at protecting assets? My opinion is no, for two reasons. First, the nominal amounts exception is only a policy decision which can be reversed at any time. It does not have the force of law which is in fact contrary to the policy and does call for a penalty. Second, in most of the cases I work on there are better techniques available to achieve asset protection or maximization.

If you want to protect assets from nursing home bills, do it right and do it within the law. To get started you can call me at (832) 592-7913.