Medicaid Gifts and the Simplified Application

Posted on: February 11th, 2016 by Mark R. Friedman

Last week, New Jersey Medicaid announced a simplified process for applying for Medicaid for people with income below the federal poverty level who haven’t made gifts.  We wrote about that in a blog post last week.

This simplified process for some applicants is a welcome development.  Unfortunately, however, as is often the case with Medicaid, it’s not as simple as it appears.

The process involves applicants being able to use an affidavit to attest that no gifts were made, instead of having to submit five years of financial records for the Medicaid agency to review.  However, it’s not always clear what’s a gift, and transfers that wouldn’t be gifts in other contexts are gifts for Medicaid.

Under Medicaid rules, a gift is a transfer of assets for less than fair market value.  A gift can be any amount and to any recipient.  Unlike with tax, there is no $14,000 exemption, and charitable donations can be counted as gifts.

For example, if Jane gives a $10,000 wedding present to her son, it’s a gift.  If she transfers $50,000 in stocks to her daughter, it’s a gift.  If she makes a donation of $5,000 to her church, it’s a gift.  If she sells her car to her sister for $4,000, when the car is worth $10,000, it’s a $6,000 gift.

Gifts incur a Medicaid penalty – in the long term care context, for every $10,000 you give away, you lose roughly one month, during which Medicaid will not pay for your care.  However, some gifts are exempted from incurring a penalty, including certain gifts to your spouse, a child with disabilities, and others in certain specific situations, as well as gifts outside the Look Back Period.  (Since exempt gifts are very technical, you should consult with a lawyer on specific questions.)

It’s not clear whether someone who has made an exempt gift can use the affidavit.  It’s a technical question, and hopefully the answer will become clear as this simplified process sees more use.  However, you certainly don’t want to be in the position of unintentionally lying to the government in an affidavit, so if you have any questions about whether you’ve made gifts, you should speak with elder law attorneys like FriedmanLaw about your specific situation.

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