Gifting Money To Protect From Long-Term Care Costs

Gifting Money To Protect From Long-Term Care Costs and Medicaid Improper Transfers. Want to know more about transfers from your loved one's name, by way of gift or to a trust, and how Medicaid could use that as an improper transfer?

How can gifting be used to protect your loved ones’ assets against the rising cost of long-term care?

As of 2022, the Federal Gift statute will allow you to gift $16,000 to your loved one and nobody has to pay taxes on that.

Example:  If your parents want to give you $16,000, then you can receive that money tax-free.  They get to transfer it to you tax-free.  It's a gifting tax that does not apply. There is no tax on the $16,000.

On top of that, next year, 2023, it's going up to $17,000.  You can gift or give your loved ones $17,000 as a gift, tax-free. 

There are certain requirements as to what you need to file with the IRS to show that this gift is non-taxable.

The big question is, how does this work with Medicaid and long-term care planning?

When you are in a nursing home, and you don't have enough money to care for your long-term care, you can qualify for Medicaid.  Medicare only pays for the first hundred days while you are in a long-term care facility.

Once you're at 101 days, you have to figure out how you are going to make payment. Who is going to pay for your care?  Are you going to private pay?  Do you have some sort of insurance that's going to pay?  Like long-term care insurance? Or are you going to qualify for Medicaid?  These are the big three that people use to pay for their extended stays at a nursing home.


What if you gift the $16,000 away?  Does that protect against the five-year look back?  Gifting does not protect against long-term care.  This is why there are Medicaid rules.

Now if you have an overall gifting strategy that is working or is incorporated with some estate planning, it may work. But just to think your mother or your grandmother has $50,000 and she wants to give you $16,000 and give a cousin $16,000 so that she can qualify for Medicaid.  It's not going to work.  Here's why:

One of the main reasons is Medicaid can determine what are improper transfers.  Let's say, you gift some money to your children.  And it's within that five-year look-back period.
Currently, as of the date of this video, in Ohio, each month of penalty gets triggered by a $7,453 gifted.  This means that every $7,453 gifted equals one month of penalty.


Your grandmother gives me $16,000 under the federal gifting statute that says she can gift away $16,000.  Medicaid determines that was an improper transfer.  So now they will divide that $16,000 by $7,453.  That is two months of ineligibility.

What that means is if your grandmother needs to go into the nursing home on January one, she is now ineligible to go into the nursing home because she made an improper transfer or improper gift to me.  For her to get into the nursing home and for Medicaid to pay she would have to wait one month, which will be from January to February, and then from February to March.  She would have to go in March on Medicaid.

Now, that does not mean she can't go into the nursing home.  What it means is on January 1st when she wants to go into the nursing home, she has to either be private pay or have long-term care insurance.  The ineligibility period is based on the fact that she gifted $16,000, $7,453, basically two months of ineligibility.  She wouldn't be able to be eligible for Medicaid and receive nursing home care until March of 2023.

Have questions about Medicaid, gifting, estate planning, and probate?  Don’t hesitate to give Littlejohn Law a call at 740-346-2899 so we can answer your specific questions.

Littlejohn Law, LLC 
The Real Estate and Probate Law Firm 
352 Main Street 
Wintersville, OH 43953 

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