How does giving Christmas gifts impact Medicaid eligibility? My mom has always given her grandchildren presents; will this affect her Medicaid eligibility?
As with many Medicaid related subjects, there is not a simple answer to this question. Depending on the state in which a senior resides, and the value of the gift, giving Christmas gifts (or birthday / graduation gifts) can result in Medicaid ineligibility.
Let’s start with discussing Medicaid’s 5-year look back rule. This is a period of 5 years that dates back from one’s Long-Term Care (LTC) Medicaid application in which all asset transfers during this timeframe are scrutinized. (California has a more lenient look back period, which is 2.5 years). This “look back” is in place to ensure that assets were not given away or sold for less than fair market value in order to meet Medicaid’s asset limit, and hence, be eligible for LTC Medicaid. Violating this rule can result in a period of Medicaid ineligibility.
Unfortunately, Christmas gifts, as well as gifts given for other special occasions can be seen as a violation of Medicaid’s look back rule. This is because in Medicaid’s eyes, it is assumed that any gifts given were with the intention of lowering one’s assets in order to meet Medicaid’s asset limit. (Generally speaking, the asset limit is $2,000. To see state specific asset limits, click here). However, if one can prove that the intent of the gift was for another purpose, such as for Christmas, the gift may not be considered a violation of the look back period. For instance, if a Medicaid applicant writes a check to his / her adult child every Christmas, and has done so long before the 5-year look back period, this could serve as sufficient proof that the gifts weren’t given for the purpose of meeting Medicaid’s asset limit.
That said, even small gifts can result in a period of Medicaid ineligibility. Therefore, it is always best to error on the side of caution. Awareness of the Medicaid gift giving rules in the state in which one lives can be extremely beneficial, as there will no longer be any question as to what is allowed and what is not. Some states do allow “de minimis gifts” (gifts that are determined to be of small value and are overlooked when it comes to the look back period).
For instance, Indiana allows one to gift up to $1,200 / year, and Virginia allows up to $4,000 / year to be gifted (as long as there is documentation that there has been a pattern of gift giving, such as for Christmas, for a minimum of 3 years prior to Medicaid application). Pennsylvania is even more lenient when it comes to gift giving, and allows up to $500 / month ($6,000 annually) to be given as gifts. (To consult with a Medicaid planner in your area regarding gift giving rules, click here).
Please note that the federal gift tax exemption does not extend to Medicaid gift giving. Unfortunately, some persons mistakenly believe that this $15,000 (in 2019) gift exclusion extends to Medicaid, which results in a violation of the look back period and Medicaid disqualification.