Can’t I just give all of my assets away?
The answer is “maybe” — but only if you do it the right way and at the right time. If assets are given away at the wrong time and/or in the wrong amount, the law provides for a penalty — a period of ineligibility for Medicaid — based on the amount of the transfer.
Doesn’t federal law allow me to give away $14,000 a year away to my children?
Yes, in 2017, the Federal Gift Tax laws allow you to give away up to $14,000 per year to anyone you want. You and your spouse may each give an unlimited number of these $14,000 gifts per year. So, for example, if you have 4 children and 8 grandchildren, you could give away up to $168,000 each year. However, even though the Federal Gift Tax laws allow you to give away up to $14,000 per year to as many people as you wish without gift tax consequences, Medicaid laws still apply to these gifts, meaning that these gifts will result in a penalty — a period of ineligibility for Medicaid in most part of Virginia of one month for every gift of $5,933. So, your $168,000 annual gift would actually result in more than 28 months of ineligibility for Medicaid.
Does giving money to my church or other charities create a penalty?
Yes. Giving away money to charity is treated the same as giving away money to your children or grandchildren. There is no exception for gifts made to charity. Many people who apply for Medicaid are horrified to discover that they are penalized for having been good citizens and having given money to charities.
If I gave assets away and created a period of ineligibility for medicaid, can the person to whom I gave the assets return the assets to me and eliminate the period of ineligibility?
Yes — the general rule is that a transfer can be cured by the return of the transferred asset. In fact, there is a potential planning strategy under the new law that is based on the partial return of transferred assets. However, because the regulations giving effect to the new law have yet to be written, it is not clear whether this new strategy will work.
Are there any assets that can be transferred without resulting in a period of ineligibility?
Yes. There are transfers to certain recipients that will not trigger a period of Medicaid ineligibility. These exempt recipients include:
(1) A spouse (or anyone else for the spouse’s benefit);
(2) A blind or disabled child;
(3) A trust for the benefit of a blind or disabled child; or
(4) A trust for the benefit of a disabled individual under age 65 (even for the benefit of the applicant under certain circumstances).