Can I make gifts to my grandchildren?

This entry was posted on January 21, 2016

Can I make gifts to my grandchildren? If Medicaid penalizes you for making transfers, does that mean you can no longer make gifts?

Example: Grandma gives her grandson $5,000 to use towards purchasing a car. Two years later, Grandma has a stroke and permanently enters a nursing home. Will this gift by Grandma be penalized by Medicaid?

Under the Medicaid law, any gifts you make within five years prior to applying for Medicaid coverage for 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 five years passed from the date of the gifts, Medicaid would not be able to penalize the gift. However, in the above example, only two years passed from the date of the gift.

Since the grandmother made the gift within the five-year look-back period, then in order to avoid the imposition of a transfer penalty by Medicaid, either the grandson must return the gift or the grandmother must prove that the gift was for a legitimate purpose and that nursing home care was not foreseeable based on her good health.

Fair Hearing Decision

A few years ago, the Koldin Law Center, P.C., 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 five 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.

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 five years have elapsed, your trust assets will be protected. The trust can then make gifts to your family members after this five year period has passed even if you are no longer in good health. A trust can be a good vehicle to preserve your gift giving options for your family for the remainder of your life.

For a free consultation, contact us.