medicaidplanner Staff asked 5 years ago
My mom contributed $10,000 to each of her grandchildren’s education savings accounts. I think they were 529 plan accconts. Now she needs Medicaid. Will these gifts disqualify her?
medicaidplanner Staff answered 5 years ago
If the contributions were given within 5 years of long-term care Medicaid application, it is very likely the gifts would disqualify her.
A common misperception is that the IRA’s Gift Tax Exemption extends to Medicaid eligibility. This exemption allows a person to gift up to a specific amount per recipient / per year without paying taxes on the gift(s). Unfortunately, this rule does not extend to Medicaid, which has a 60-month Look-Back Period immediately preceding the date one applies for Medicaid-funded long-term care. See state-specific Look-Back Rules.
During the “look back”, the Medicaid agency scrutinizes all asset transfers, looking for assets that have been given away, or sold for under fair market value. If this has been done, Medicaid assumes it was to meet Medicaid’s asset limit and will enforce a Penalty Period of Medicaid ineligibility.
In the case of your mom, if she put money into her grandchildren’s education savings accounts within the Look-Back Period, she has violated this rule, and will be penalized with a period of Medicaid ineligibility. However, if she gave these gifts prior to the Look-Back Period, she will not be penalized. As an example, say your mom put $20,000 in all of her grandchildren’s education savings accounts in April of 2017 and she applied for Medicaid in January of 2023. Since these transfers do not fall within Medicaid’s 5 year Look-Back Period, she will not be disqualified from Medicaid.