A legal question and answer line for Seniors.DEAR SENIOR LEGAL LINE:

Please answer my question about Medical Assistance and gifting. I want to give money to my children but I am worried about what would happen if I later need to go into a nursing home and needed Medical Assistance to pay for my care. I have enough assets to pay for approximately one (1) year of nursing care. Beyond that, I believe I would have to apply for Medical Assistance to pay for my long term care. I worry that a gift to my children would make me ineligible for Medical Assistance. Is this true?

Signed, Lottie

 

 

DEAR LOTTIE:

No matter how old parents become, we seem to have a natural inclination to give things to our children. However, you are right to be concerned about Medical Assistance whenever any gifts are made.

Medical Assistance is the federal program (administered by the state of Minnesota through its individual counties) that pays for long-term care for people who meet its eligibility guidelines. For example, a single individual can only have $3,000 in countable assets in order to be eligible for Medical Assistance. Because the program has income and asset guidelines, there are penalties if you give away assets.  (Please note: there are some limited exceptions to this rule, but the exceptions are too complicated for the scope of this article). The general penalty resulting from a gift is that you will be ineligible for Medical Assistance for a period of time, based on the value of the gift, from the date of your applicationfor Medical Assistance.  In 2006, Medical Assistance rules were modified in order to further discourage gifting. This new law was called the Deficit Reduction Act of 2005.For all gifts made after the effective date of February 8, 2006, the new rules apply.

Among the new rules resulting from the Deficit Reduction Act, are that the "look-back" period is expanded to five (5) years.  If you give a gift now, the penalty period effectively hangs over your head for up to five (5) years from the date you gave the gift.   If you apply for Medical Assistancewithin five (5) years of the gift, the County is going to see that gift and calculate the length of your ineligibility period.  The ineligibility period is the value of the gift(s) divided by the current average cost of a month of nursing home care in Minnesota (currently $5372, this figure changes every July 1st).  You will be deemed ineligible for this period of time, running from the date of your application.

Why does this matter?  At the time of your application you would have already spent your countable assets down to your eligibility limit and most likely would not have enough assets to pay for your care during the ineligibility period.  For example, as a single individual, you can only have $3,000 in countable assets. Obviously, $3,000 will not buy you a lot of long-term care. The average monthly fees for long term care in this area are over $5000 a month.  If you do not have the assets to pay for your long-term care during the ineligibility period, a few things may happen. For example, the County may make a determination that your health is in danger and that you need your long-term care. The County may pay for your care with Medical Assistance benefits, but then they will contact the people who received the gifts and require that they give them back to you. If those people do not pay back the value of the gifts to you, the Medical Assistance rules allow the County to take legal action against the people who received the gifts.

As with any government program, if you have been denied Medical Assistance for any reason, you have the right to appeal the denial. In order to preserve the right to a hearing, your appeal request must be submitted quickly (within 10 days in order to continue to receive benefits pending the appeal), otherwise, within 30 days of the denial. If you have any questions about appeals, I encourage you to either contact us or another attorney.

In conclusion, gifts are still made, but you must careful about them.If you give a gift, everyone must be aware of the Medical Assistance consequences. I recommend that you speak with an attorney before you make any gift. Ideally, you should be able to outlast the five (5) years from the date of the gift and not need Medical Assistance to pay for your long-term care (either have good health and/or enough money to privately pay for five years of care).  Since most people do not have enough money to privately pay for care for five years, and as we age, we tend to have more health crises, it makes sense to prepare for Medical Assistance.  If you insist on giving a gift, a safer way to do so is to make sure that you trust your child to not spend the money and be prepared to give it back to you if needed. Then, if Medical Assistance has denied you because of the gift, the child has the gift available to give back to you to erase the ineligibility period and/or to pay for your care during the ineligibility period. One way for the child to safeguard the gift in case it needs to be given back is to place it in a bank account in the child’s name only, to not commingle any other money in the account, and to not touch it until at least five (5) years from the date it was given to the child.  Obviously, the child you choose to give a gift to should not have debt or marital problems of their own that could put the gift at risk of payment to the child’s creditors or the child’s spouse.  As you can see, gifting has some serious risks.  Medical Assistance is a complicated area of law, which changes often and I encourage you to contact us and/or another elder law attorney for more information.

 

This column is written by the Senior Citizens’ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live within the Minnesota Arrowhead Region, you may contact us with questions for legal help by writing to:  Senior Citizens’ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to: www.lasnem.org. Reprints by permission only.