Mabel’s children were concerned that Mabel would need long-term nursing-home care in the near future. It was the holidays, and Mabel always got a lot of joy out of generosity. But her children had heard that people in Mabel’s circumstances should not give gifts.
The concern is real. For Medi-cal to cover the huge expense of nursing-home care, Mabel would have to show that she owned nothing more than around $2,000. And she must also show that she had not given away money or assets over the prior five years (30 months in California). That Medi-cal rule – the “look-back period” or the “transfer penalty” – would charge Mabel dearly for her generosity. Depending on the size and number of the gifts, the penalty could be substantial.
Many wrongly think that there is no penalty for gifts of up to around $15,000 annually. That misunderstanding confuses tax law with Medi-cal law (and it also misstates tax law, but that’s another subject). The Medi-cal rules are entirely different from the tax rules. In the Medi-cal context, gifts of any amount that are given during the look-back period can be penalized.
There are exceptions. These include gifts to spouses and siblings under certain circumstances, disabled children, and children who are caregivers and who live at home with the elder for a span of time. But overall, gifts and Medi-cal do not go together. The Medi-cal rules are complicated and the consequences for mistakes can be very costly. There are a number of options to protect assets and still qualify for benefits, but these options must be weighed with great care. This is why it’s best to consult attorneys who, like us, are qualified by experience and expertise in Medi-cal law.
There is one harmless deception Mabel’s children might consider, to keep Mabel happy and still satisfy the Medi-cal rules. The children might help Mabel fill out checks for all the gifts she’d like to give, together with a greeting card for each gift. Everybody could thank Mabel, tear up the check later, and tell her what they “bought” with that amount. It may be that that little device would be worth it, so Mabel could enjoy the holidays too.
Otherwise, the sooner you consult a qualified elder law attorney, the more other options may be available. If we can be of assistance, please don’t hesitate to reach out.