It Was A Gift! Why Do I Have To Give It Back?

I thought I would share with you one of the many similar devastating phone calls I receive at least once a week.

John and Jane, a healthy couple in their mid 80’s, made gifts of $13,000 to each of their six family members, including their two children and four grandchildren.  Not long thereafter, Jane suffered a stroke and required long term care in a nursing home.  When applying for Medicaid, John and Jane discovered the hard way that their tax-exempt gifts $13,000 to each child and grandchild resulted in a penalty for Medicaid purposes. The gifts made her ineligible to receive Medicaid benefits for about 18 months.
Medicaid calculates the penalty like this: For approximately every $4,350 you give away, there is a one-month penalty in which Medicaid will not pay for the nursing home.  Now John must either try to get the gifted money returned or pay privately for Jane’s nursing home care during the 18-month penalty period. That cost is most likely in excess of $81,000.

What most people do not realize is that even though they can give away $13,000 per person per year without any gift tax consequences, IRS rules and Medicaid rules are very different. Any gift made during the five years prior to applying for Medicaid creates a penalty period for Medicaid purposes! It is very unsettling to learn that what you thought was proper estate and financial planning for tax purposes can lead to terrible results when applying for Medicaid.

Attorneys who concentrate  in elder care law look at the total picture when providing estate planning for their clients. With experience in estate planning and planning for incapacity, an elder law attorney could have prevented the complicated scenario faced by John and Jane. An elder law attorney would explain to you, that any money “gifted” by an aging relative should always come with a provision that it cannot be used for five years, because if nursing home care is needed, you will need it back.

There are many other planning tools an elder care attorney can use to maximize your estate and ensuring you have the benefits you need if and when the time comes. Always consult a professional prior to making gifts so that you don’t end up in a difficult situation.

Thanks, Richard

Barron Law Firm


If you have a question concerning Veteran Benefits, Aid and Attendance, Nursing Home Care, Medicaid qualification, Estate and Disability Planning in the Dallas, Plano, Allen, McKinney, Frisco, Denton, Lewisville, Gainesville and Sherman, Texas then call the Barron Law Firm at 1-800-939-9093 or visit our web site at  Barron Law Firm is a trusted guide through the maze of government benefits to help pay for the cost of long term care for ailments such as Alzheimer’s, Parkinson’s, Dementia, Strokes that would require in home , assisted living or nursing home care.

Legal Disclaimer

This information has been provided for general informational purposes only. It does not constitute specific legal advice. Do not take any action based on your understanding of the legal concepts presented in this letter except to call a qualified elder law attorney. The receipt of this information does not establish any attorney-client privilege. Proper legal advice can only be given upon consideration of all the relevant facts, circumstances, and laws.

2 Comments to It Was A Gift! Why Do I Have To Give It Back?

  1. Leon Clark

    I know Richard. It’s awful If I have people who need advice on this, I’m sending them to you!!! What is your closest office to Ft. Worth/Tarrant County??

    • richard

      Hi Buddy,

      The closest is my Plano Office on Preston Rd. near the Bush Toll Road. Had Clients from the Ft. Worth area this week and they were pleased as to how quick it was to get here from Ft. Worth on the Bush Toll Road. Othe ragangements can be made depending upon the circumstances.

      Thanks, Richard

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