Many people believe they can gift $15,000 per year and be OK when it comes to applying for Medicaid. Unfortunately, this is not the case. The $15,000 gift exclusion is related to gift tax, but has nothing to do with gifting assets in anticipation of nursing home or assisted living residence. Any amount gifted within the last 5 years incurs a penalty when a person applies for Medicaid (or Title 19) to help them with the cost of nursing care.
Watch our video to learn more about Medicaid gifting rules.
How much can a person legally give away and still qualify for Medicaid to help pay for nursing or assisted living costs?
Hi, my name is Dan Krause, Krause Estate Planning & Elder Law Center, and we help elders and their loved ones save their life savings in the face of nursing or eldercare costs.
Today I want to talk a little bit about gifting - giving away property or transferring property away from yourself in order to try to save it, or save it for the family so that a person can qualify for Medicaid, have their care paid for, and still be able to pass something onto their loved ones.
This is a question that I get fairly often, and it is a question that is difficult to answer because there are many parts to it. But let's just talk in very general terms.
So, there is a misconception about gifting and the amount that you can gift. A lot of people have come to me asking about the $15,000 gift rule. There is a gifting rule that is currently the $15,000 limit where you can give away $15,000 in any given calendar year, to any number of people.
So you can give your son $15,000, you can give your daughter $15,000, you can give your daughter's husband $15,000, you can give your neighbors $15,000 and you can give anyone else you want $15,000 - as long as it is not more than $15,000 per person, per calendar year.
There is no gift tax consequence. Now that's specific to gift taxes. I want to emphasize that it has nothing to do with the gifting ability regarding qualifications for Medicaid. It only has to do with the gift tax, and that's the confusion.
Gifting is talked a lot about in Medicaid planning for nursing care, but it's also talked about in terms of estate planning or planning to avoid taxes at the time of your death.
Currently, there is a $15,000 limit and it is expected to go up to $16,000 next year or the year after. It jumps by $1,000 every few years depending on inflation and cost of living. So it started out around $10,000 several years ago, and then it went to $11,000 then $12,000, and now it's at $15,000. Soon it'll be $16,000 but it won't be until the beginning of a particular calendar year, and you'll know shortly before that calendar year starts what that number will be.
Gifting for the purposes of Medicaid is limited in the gifting amount, and there really is no minimum. So if you give away $1 that is supposed to be disqualifying for Medicaid. Now it's not completely disqualifying, it would only trigger a penalty period. We can talk about penalty periods in a later video.
According to Wisconsin law for Medicaid (the rules vary from state to state), state and local workers do not care about the minimum value of these gifts. Although, in practicality, if you give away $100, typically the state workers or Medicaid workers aren't going to really care. And the reason is, that penalty period for that gift will be less than one day. And for $100 gift, it's very unlikely that the person made that gift in anticipation of avoiding paying for nursing costs.
If you have any questions about this or any other issues related to Medicaid planning, estate planning, probate, or estate administration of trusts after death, give us a call.