Can I make gifts to my grandchildren?
March 1, 2016
This edition of the Koldin Report E-Newsletter reviews whether grandparents can make gifts to their grandchildren. The previous edition of the Koldin Report E-Newsletter explained the Medicaid transfer penalty rules. The next logical question is if there are penalties for making transfers, does that mean you can no longer make gifts? All previous newsletters can be found on our website by clicking here.
How Do Gifts Impact Medicaid Spend Down Rules in NY?
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 or Medicaid spend down rules?
Under the Medicaid law, any gifts you make within 5 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, also known as Medicaid spend down.
If the grandmother did not need Nursing Home care until more than 5 years passed from the date of the gifts, Medicaid would not be able to penalize the gift. However, in the above example, only 2 years passed from the date of the gift.
Since the grandmother made the gift within the 5 year lookback 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/p>
Fair Hearing Decision On Medicaid Spend Down in NY
A few years ago, the 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 5 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 a Medicaid spend down.
Therefore, the Medicaid law does make gift giving riskier for our elderly, but with the right facts, such gifts can be defended.
How An Irrevocable Family Trust Relates to Medicaid Spend Down in NY
With a properly designed Irrevocable Family Trust, assets can be transferred to your Trust while you are healthy. After 5 years have elapsed, your Trust assets will be protected. The Trust can then make gifts to your family members after this 5 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.
Medicaid Spend Down in NY & How We Can Help
At the Koldin Law Center, P.C. with offices in Syracuse , New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options including reviewing your options to establish a Revocable Trust and/or an Irrevocable Trust. We are also available to discuss your asset protection options even if you are already in a Nursing Home. Our office can handle the entire Medicaid application process for the client.