No, you can’t just give away your money - Clarifying the look-back period relative to asset protection

Hardly a day goes by when I don’t have a client who tells me that they can give away a certain amount of money free and clear, avoiding look-back periods for long-term care planning. They inform me that their neighbor, friend, or cousin told them that this is allowable. I then have the unfortunate task of telling them that they are wrong and that most states that have enacted the Deficit Reduction Act. After February 8, 2006, the rules relative to gifts changed.

Regardless of the amount, any gift that is made is a transfer and is subject to a look-back period of five-years for Medicaid purposes. This doesn’t mean that the State will take that money, but rather, that the State will not pay for the donor’s long-term care costs until the five-year look-back is exhausted, or in the alternative, until all the gifts that have been transferred are used to pay for the institutionalized person’s care.

The sum that most clients feel that can be gifted (erroneously) without a look-back is $10,000. This amount actually relates to the annual amount that can be gifted on an annual basis to as many individuals as the donor wishes without the need to file a gift tax return. However, the exemption in 2009 for gift giving on an annual basis is $13,000 per donee per year. This is only a tax amount gift, and is not a Medicaid or asset protection plan exempt amount. A gift of $13,000 from a parent to a child will constitute a non-taxable gift, but this gift will carry with it a waiting period of five-years relative to Medicaid qualification.

Far too often, family, friends, and other non-professional advisors provide well-intended but erroneous advice that can lead to significant adverse consequences if relied upon. If in doubt, it is always appropriate to contact a professional accountant, attorney, or other financial advisor for the appropriate and up to date laws relative to gifts, Medicaid planning, taxes, etc.

If you don’t know how to find a qualified lawyer, you may contact your local bar association or the National Academy of Elder Law Attorneys.


By: Hyman. G. Darling, Esq.

Comments

[jordan 6]

Far too often, family, friends, and other non-professional advisors provide well-intended but erroneous advice that can lead to significant adverse consequences if relied upon. If in doubt, it is always appropriate to contact a professional accountant, attorney, or other financial advisor for the appropriate and up to date laws relative to gifts, Medicaid planning, taxes, etc.