It’s an extremely common mistake made by families trying to handle Care Assistance Planning on their own. Mom was diagnosed with dementia, in a few years she will need nursing home care, and she needs to spend all of her money down to $2,000 to get Medicaid to pay for it. Cousin Ronnie tells you that he heard that Mom can gift $15,000 a year to as many people as she wants, including Cousin Ronnie. (Wink, wink). The family checks with their friend and neighbor Stephanie who works in an accountant’s office, and she says it’s true that the tax code says you can give away up to $15,000 each year to as many people as you want.
Great! Suddenly Mom, or more accurately oldest Son who has power of attorney, starts gifting $15,000 a year to Mom’s four kids and nine grandchildren for the next three years, transferring $585,000, getting mom to just under $2,000. Now Son applies for Medicaid for Mom and gets rejected, being told Mom is now ineligible for Medicaid for the next seven and a half years. Seven and a half years! How can this be? And when the Medicaid caseworker asked if that money could be paid back, the answer was “no” because it was already spent on college tuition, home improvements, and vehicles.
It’s because most people don’t need to have extensive knowledge of tax law or Medicaid regulations in their daily life, so it becomes easy to mix up two different sets of rules. The rule regarding gift taxes is that you can give up to $15,000 per year to as many individuals as you want without having to file a gift tax return on Form 709. The Medicaid rules are far different, and they only allow the usual and customary birthday and holiday presents in line with what has been occurring over many years. So if Mom has been giving each grandchild $50 on their birthdays and $50 at Christmas, then a $15,000 check is not in line with that.
When it comes to Care Assistance Planning, families can’t afford to get it wrong by getting advice from Cousin Ronnie and Neighbor Stephanie. This one simple gifting mistake in the example means Medicaid won’t help for more than seven years. Working with a team of professionals who are versed in the Medicaid rules and the regulations of other benefit programs can help the family save a lifetime of hard-earned savings for the next generation while getting their loved ones the care they need. For more information, please claim your free information packet: www.CareAssistanceCenter.com/carepacket2