The Medicaid rules on gifting have become increasingly stringent over the years. Now, any gift or transfer of assets made to children, churches or other charities is subject to a five year look back period. This means that any gifting done within five years prior to applying for Medicaid will result in a penalty and possible denial of coverage.
While it is often very difficult to predict whether nursing home care will be required within five years, the penalty is very severe. The penalty period where coverage is denied will not begin until the individual is residing in a nursing home and otherwise eligible for Medicaid benefits. With nursing home costs exceeding $7,000 per month, many lack the funds to sustain these costs for very long.
Luckily, there are a few ways to avoid the penalty period for gifting. One method is asserting that the gift or transfer was not motivated by Medicaid. For example, if a healthy and independent senior is involved in an accident that drastically limits their mobility and forces them into a nursing home, the gifting penalty could possibly be waived because there was no way they could have predicted or expected that they would require Medicaid.
The other method to avoiding a gifting penalty is the hardship waiver. Under this law, if an individual lacks the funds to pay for medical care and discharge from a nursing home would deprive them of medical care so that their health or life would be endangered then the state may waive the penalty.
Neither solution presented is perfect. Neither is guaranteed to waive the penalty or act as a permanent solution to the penalty. This is why with the increasing stringency of Medicaid law, it is important to plan ahead and meet with an elder law attorney months before nursing home care is required to plan for possible penalties or denial of benefits.