Education Saving Account Contributions Impact on Medicaid Eligibility

Last updated: July 22, 2019
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityEducation Saving Account Contributions Impact on Medicaid Eligibility
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?

1 Answers
medicaidplanner Staff answered 5 years ago

If the contributions were given within 5 years of the 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. If you’re not familiar with the gift tax exemption, this exemption allows a person to gift up to $15,000 per recipient / per year without paying taxes on the gift(s). Unfortunately, Medicaid has what is called a look-back period, in which Medicaid reviews all past transfers an applicant, and his or her spouse (if applicable) has made within 5 years from the date of one’s Medicaid application. (Please note that the only state that has a different timeframe for the look-back period is California, and in this state, the look-back period is 30 months). Simply put, if assets have been given away, or sold for under market value, Medicaid assumes this was done in an attempt 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 timeframe of the look-back period, she has violated the look-back period, 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 2012 and she applied for Medicaid in January of 2019. Since these transfers do not fall within Medicaid’s 5 year look back period (or 30 months in California), she will not be disqualified from Medicaid.

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