Usually not, but there are some times when one can make a gift and still remain on Medicaid.
Did that answer surprise you? Most potential clients who ask that question are told a resolute NO by their Elder care lawyer or in other articles written by Medicaid lawyers. By and large, “no” is a good rule of thumb. Most Medicaid programs, especially the institutional care program and long term care medicaid waiver, will look back 5-years and calculate a Medicaid transfer penalty, which will result in a period of disqualification. Click the link to read more about the Florida Medicaid look back period and how the Medicaid disqualification period is calculated.
It’s important to keep in mind that “Medicaid” is not one program – it’s an umbrella term that refers to bunch of different programs – some are tied to Social Security and a partnership between the State of Florida and the Federal Government. Others are purely state run programs.
The Florida Medicaid Economic Self Sufficiency Manual, in section 1640.0606 explains that the transfer of assets and income policy, which penalizes a Medicaid recipient or Medicaid applicant if they make gifts, only applies to certain Medicaid programs (and not others).
Gift = Transfer of Assets for Less than Fair Market Value
First, note that I use the terms “gift” and “transfer of assets” interchangeably. To be more precise, when I refer to gifting or a transfer of assets, I am talking about a situation where a Medicaid recipient or Medicaid applicant gives something away without receiving fair-market value in return. This is not the equivalent of spending one’s money. A Medicaid applicant can pay a contractor $8,000.00 to make home improvements – that is not a gift or transfer of assets for less than fair-market value. That is, in fact, an example of a transfer of assets FOR fair-market value and that is perfectly acceptable to Medicaid/DCF and will not result in a penalty.
On the other hand, if a Medicaid applicant gives their child $8,000.00 that is an example of a gift or transfer of assets that will result in a transfer penalty.
Note that spouses can gift to each other without limit or penalty. On the other hand spouses are considered one "unit" so assets in either spouse's name are counted against the one spouse applying for or receiving Medicaid.
Florida Medicaid Programs Where Transfer of Assets are Allowed
Section 1640.0606 of the Florida Medicaid Manual explains that the transfer-of-asset penalties are not applied to Community Hospice, certain Intermediate Care Facility Programs for those with Developmental Disabilities, or other SSI-related community Medicaid Programs.
Those on the Medically Needy Program are the most common types of clients who come to me looking for Medicaid Lawyer advice. The Medically Needy Program is discussed at 0240.0104 of the Florida Medicaid Manual. I will link to an article below that further discusses some lesser-known Medicaid programs in Florida.
But someone on one of these program may give away assets without penalty. There are plenty of reasons why one should not give everything away if on this program (i.e. loss of control of the money, which could be otherwise be protected and ensured that it is only used for the Medicaid-recipient’s benefit).
Florida Medicaid Programs Where Transfer of Assets Will Result in Penalty
Section 1640.0606 of the ESS Policy Manual explains that the Transfer of Assets (or Income) Penalty applies to the Institutional Care Program (ICP), MEDS-AD, institutionalized Hospice, Home and Community Based Service Programs (HCBS) (i.e. Medicaid Waiver that allows the recipient to live at home or in an ALF), and the Program for All-Inclusive Care for the Elderly (PACE), regardless of whether the Medicaid applicant is receiving SSI-Direct Assistance (cash) as well as non-SSI recipients.
Most clients who are seeking out an Elder Law Attorney are going to be applying (or planning to apply) to one of these programs. This is why, as stated above, Elder Care Lawyers’s initial response to the question of whether gifts are allowed, will almost always be a resounding “No!”
However, sometimes it makes sense to purposefully transfer or gift assets when contemplating applying for one of these programs. Most frequently this occurs when someone anticipates eventually needing home and community based Medicaid or nursing-home Medicaid close to or after 5-years.
Perhaps someone is showing the first signs of dementia or you or your loved one is in their 80s and in relatively good health. These are two common scenarios where it might make sense to meet with an Elder Care Attorney to discuss how to best protect your assets against the threat of long-term care expenses. At our elder law consultation, we will talk about the 5-year Irrevocable Trust. In essence, this is intentionally gifting assets to a trust that you do not directly control. But assets placed in the trust can only be used for your benefit (you control who the trustees are and retain the power to remove and replace them if they act inappropriately) and provides some other asset-protection benefits as well. If, after 60 months, you need Medicaid, you can apply and will be approved without worrying about the transfer-of-assets penalty. While we hope for the best, we also plan for the worst. If Medicaid is needed within 60 months we have back up strategies that will still allow my client to apply for Medicaid. Sometimes that involves private paying for long-term care for a period of time. For example, if Medicaid is needed after 4 years and six months of transferring assets into the irrevocable trust, it might make sense to private pay for six months and then apply for Medicaid. On the other hand, if, my client needs to apply for Medicaid after only a year or two of transferring assets into an irrevocable trust, we would utilize our back up Medicaid-planning strategies.
Medicaid Lawyer Resources
1640.0606. Transfer of Assets and Income
1640.0608. Transfer Look-Back Period
Article Discussing Other Florida Medicaid Programs