If you are reading this article, it is likely that at some point in your lifetime you may have worked through the placement of a loved one in a nursing home. If not, there is a high probability you know of someone who has. With the cost of nursing home care exceeding $150,000.00 per year in some areas, many individuals are forced to consider applying for Medicaid to cover the cost of care at a nursing facility.

When determining eligibility for Medicaid to cover the cost of a nursing facility, the Department of Social Services (“DSS”) will evaluate all income and resources actually or potentially available to a Medicaid applicant or recipient, but only such income and/or resources as are found to be available to the applicant may be considered in determining eligibility for Medicaid. For 2016, an individual can have no more than $14,850.00 in available resources to be eligible for Medicaid. Generally, in determining the Medicaid eligibility of a person receiving nursing facility services, any gifting of assets made by the applicant within the “look back period” will render the person ineligible for Medicaid for a period of time equal to the value of the gift divided by the regional rate. Under current law, the look back period is the five (5) year period prior to the date of application. A gift is defined as any transfer of assets for less than fair market value.

Many people do not realize that your everyday common gifts are captured by this widely cast net. For instance, paying for your grandchildren’s college education, assisting a financially troubled child, and contributions to your local church are all considered gifts for purposes of determining Medicaid eligibility for nursing home care. A common misconception is that you are allowed to gift $14,000.00 each year without incurring a penalty for Medicaid eligibility purposes. This is incorrect. In 2016, the annual gift tax exclusion for federal gift tax purposes is $14,000.00. That means that you can open the phone book and give everyone in the phone book $14,000.00 this year without filing a gift tax return (my name starts with a “D”). However, federal tax law has nothing to do with Medicaid eligibility rules. If you are gifting $14,000.00 each year, those gifts will be evaluated for Medicaid eligibility purposes.

When is a gift not a gift (or in Medicaid terms a “transfer”) for Medicaid eligibility purposes? New York State law provides that an individual will not be ineligible for Medicaid as a result of a transfer of assets if “the asset was transferred exclusively for a purpose other than to qualify for Medicaid.” At first glance, it appears easy. Of course you didn’t pay your grandchildren’s college education because you were trying to qualify for Medicaid. However, as a matter of local policy, DSS has historically been averse to accepting this argument from applicants who have made significant gifts of assets. The result is that many individuals are denied nursing home Medicaid eligibility for making everyday (and necessary) gifts during the look back period. In the recent past, we have seen through case law instances where applicants have been successful in arguing that gifts made during the look back period were for purposes other than to qualify for Medicaid and therefore, eligible for nursing home Medicaid. In making such determination, DSS will consider things such as (i) the physical and mental condition of the applicant at the time of the gift (ii) the use of the gifted funds, (iii) whether the applicant gifted his/her own funds or funds that were received through inheritance or a windfall, (iv) whether the applicant lived independently in the community when the gifts were made (v) the financial security of the applicant, (vi) the time that elapsed between the gifting and the applicant’s institutionalization and (vii) whether the applicant had considered institutionalized care when the gifts were made.

In one particular case the applicant gifted approximately $210,124.14 from March 20, 2006 through September 10, 2007 while the applicant was in good physical and mental health. The gifts were made primarily to the applicant’s two sons who were experiencing financial difficulties. Portions of the funds gifted originated from monies received by the applicant as a result of her sister’s death and the sale of the applicant’s home. Almost two years after making the gifts, the applicant entered a nursing facility. Prior to entering the facility, she lived independently. While she was living independently and at the time the gifts were made she was able to drive and shop for herself and pay her living expenses using her own resources. At the time the transfers were made there was no contemplation of nursing home care. Although initially determined to be ineligible for nursing home Medicaid, the case was appealed and on appeal, the hearing officer found that the gifts made by the applicant were for purposes other than to qualify for Medicaid.

Given the economic environment, it has been increasingly common for me to encounter situations where gifts have been made by applicants to their children or grandchildren during the look back period which is giving rise to a more complicated Medicaid application process. The success of each argument is dependent on the facts and circumstances of each case and may require an appeal of an initially adverse determination. The assistance of competent counsel practicing in the area of elder law is imperative. It is important to work with a seasoned elder law attorney with Medicaid planning experience. Please contact us at our Rye, NY Office at 914-925-1010 or our Yorktown Heights Office at 914-245-7403 or complete our online Contact Formwww.plantodayfortomorrow.com.

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