How much money can Mom gift me without raising red flags with Medicaid?

SwimmerToo, and what about the parents who were abusive or neglectful or just plain not there for their kids? I really "don't get" filial responsibility laws, either.

Thanks to attorney Heiser for his answer above. I've heard that some states have filial responsibility laws where relatives can be asked to pay for nursing home care for someone who runs out of money. I think my question of fairness comes into play in such circumstances. If adult children urge their parents to save, but Mom and Dad blow their money on gambling and later run out of resources, is it right to force the adult children to pay? If they have no ability to control their parents' spending (and their parents are competent adults), then why do they have a responsibility to pay their parents' bills? I don't understand these filial responsibility laws and would like to know more about them. Thanks!

Yeah, it is a little unfair. Life is a lot unfair, as I suspect you've noticed.

If a 45-year-old goes on an extremely expensive cruise and then at age 49 becomes disabled and needs to apply for Medicaid, the cruise will not have any impact on the application. She spent the money on herself, which is allowed. You might say it is unfair that she gets to apply for taxpayer assistance after spending so lavishly. She might say it is unfair that she got this disabling condition that she never expected and did nothing to cause or deserve.

"Fair" and "unfair" don't seem to have much to do with health issues.

Medicaid only looks for uncompensated transfers (i.e., gifts) made within the five-year period prior to applying for Medicaid. If the applicant wants to blow money on trips and gambling, those are for the applicant's own benefit and not a gift, so does not affect Medicaid eligibility.
Indeed, virtually all other government needs-based programs simply look at the assets the person has currently and don't even go back to look for gifts, like Medicaid does. The government can't get into forcing people to live one kind of life over another, perhaps much to the chagrin of the hard-working and frugal neighbor who saves and then pays for his own medical care or nursing home care who looks across the street to see his profligate neighbor who never saved and/or gambled his money away over a lifetime, and now seeks government benefits of various kinds.
What alternative is there?

I've wondered too about the question of how an elder spends his or her own money and then applies for Medicaid when the money runs out. It doesn't seem right for someone to spend lavishly at the casino or go on a cruise around the world when he should be saving for possible long-term care needs in old age. I agree it seems a little unfair, because any one of us could drop dead tomorrow, and the person might want to enjoy his money while he can. But if people are going to ask others to pay for their care when they run out of money it seems reasonable that they should live frugally and do what they can to make their resources last as long as possible. What do others think? Does Medicaid look at how frugally or how lavishly the senior lived prior to application for assistance? And how far back should Medicaid look? I mean, if a 45-year-old took a round-the-world cruise would that be considered extravagant when the individual is probably decades away from needing Medicaid anyway? I'd like to hear from others on this.

Relax, I'm just asking hypothetical questions. It seems like in a couple of the responses, it's being suggested that I'm trying to do something illegal. We are not extremely knowledgable about these matters (hence, why I'm on a support board to familiarize myself) but have heard the horror stories about people having to undergo extended hospital stays and watching their entire savings, which they've worked for all their lives, get taken in a matter of weeks. Personally, I'm gainfully employed and not in bad shape myself... if my parent wants to leave things to me, that's great. But if everything she worked for is just going to go up in smoke, I'd just as soon advise her to go take a cruise around the world, go to Vegas and enjoy what she worked for.

If your mother has "considerable financial savings," then why would she need Medicaid to pay for her care? Medicaid is for impoverished people, not for people who've hidden their assets. Beware. If you do go through with trying to transfer the money, you should not do it on your own with advice from the internet. Plenty of people try this and plenty get caught. So, if you hide the money, don't spend it because in all likelihood, you'll have to have it on hand to pay for Mom's care when Medicaid won't. Another option you could consider, if you're looking to preserve your inheritance, is to care for her yourself. Don't ask the government for a handout and they'll stay out of your business. You can keep every penny.

sirpsychosexy, are you asking if it is possible to lie and not get caught? I suppose so. Not everyone who cheats on their income taxes gets caught either, I suppose. I still wouldn't recommend it.

Regarding terrim's comment: The "lookback period" is limited to 5 years prior to the date the individual applies for Medicaid. Any transactions outside of that period may not be considered by the state when a person applies for Medicaid. Also note that in some states income-producing property--of any value--is exempt for Medicaid purposes.

Regarding the comment by sirpsychosexy, below: It's true that the state government workers do not follow the senior around to verify what they tell them. The same is true when you file your tax return, if you are in a cash business. However, when you sign the tax return (or Medicaid application) you are obligated to report accurately, completely, and truthfully what actually happened. To do otherwise invites a charge of fraud, which incurs both jail time and fines. In situations other than gambling, the state Medicaid department will ask to see receipts for purchases or other documentation to prove that the funds were spent on something and not gifted to a family member.

Curious,how would they tell the difference between gifts/transfers, and monies which the senior might have just spent lavishly? For instance, what if the bank statement shows the senior cashing out around $3000 a month, but he/she just explains it as "I took it to the casino"? How do they know they didn't just turn around and hand a stack of cash to a family member... And, voila,the money is transferred? Or, will they also punish the senior for how they chose to SPEND their own money?

None. In the likely event that she needs Medicaid, they will look back for 5-7 years and if they see red flags, they can go back further. Property is not exempt. I have learned all of this the hard way.

Unfortunately, there is no minimum amount that can be gifted to avoid the Medicaid penalty. All gifts made within the five-year period immediately prior to the date your mother applies for Medicaid are added together to figure out her penalty period. The penalty is equal to the total amount gifted divided by your state's average monthly nursing home cost (set by each state annually); that figure is the number of months that Medicaid will not pay for your mother's care (i.e., the penalty period).

The two-year rule you refer to requires that you provide such care for your mother that BUT FOR SUCH CARE she would have needed to move into a nursing home, and such care is provided for at least the two-year period immediately preceding the date your mother eventually enters a nursing home. If you can document that, then your mother can then transfer the home to you without it causing a Medicaid penalty. You should be sure to get a physician's statement to back this up. You must live in the same unit as your mother, not just in a different unit in the same multi-family dwelling.

Others have suggested you have an attorney draw up a Personal Care Agreement, which will permit your mother to transfer money to you in exchange for your care for her. That's a good idea; but remember that those amounts she pays you must be reported as taxable income, on your income tax return.

You need to see an elder law attorney that can draft a care agreement that will permit her to pay you for services. My understanding is that you can be paid for home care what is customary in the area where you live. But, you cannot be paid anything prior to the care agreement being in place. A lump sum payment is permitted in a care agreement but must be documented as so. When you have been caring for her for two years, the house can be transferred to you without Medicaid penalty, if you also use that address.

There is no threshold from Medicaid on gifting or transferring $.However gifting will trigger a transfer penalty. Medicaid is a needs-based program and as such they are limited to about 2K in "income" and about 2K in non-exempt "assets". The exact amounts are set by each state as the states administer Medicaid under a general federal guideline.

If mom has considerable savings, take part of that and get all her documents together (bank statements, info on marriages, birth and deaths) and go see an elder care attorney so that you can do this right and within compliance of your state laws and approach to Medicaid. They will present options. Some of them will likely involve a financial advisor. If you think they will need Medicaid, you just need to make sure whatever you do will be Medicaid compliant.

There is a HUGE difference in between gifting $$ and transferring $$ when it comes to the elderly. Anyone can gift $$ - this is an IRS and tax issue.
But for Medicaid, $$ transferred (gifted) by an elder to another and not specifically for their care or their needs with proper documentation done (like the personal care agreement Jeanne suggested), can trigger a transfer penalty under Medicaid. Transfer penalty inquiry can be very detailed and the state usually has the upper hand as they have the documents that show a transfer in the first place. Medicaid can do a full 5 year review. So if mom when into a NH today and applied for Medicaid, that would mean you must provide whatever her state wants back to 2008; or forward to 2018. Either way that is a looooooong time.

About the house, what you are talking about is MERP - Medicaid Estate Recovery (or Recoup) Program. All states that take Medicaid $$ must have a MERP program in place. There are exemptions on MERP for family who are full-time caregivers, cost of maintenance on empty homesteads; heirs who are themselves on another state program for the at-need; etc. Google your state's program.

BUT I think you are going to have a much bigger issue with the property. It sounds like this is an income producing property and a multi-unit? My answer is based on this. An elder's homesteaded property is an exempt asset under Medicaid rules. They can keep it forever (in most states) as an exempt asset for Medicaid. BUT there will be NO income from them to pay for anything on the house (like taxes, insurance, etc) as all their income must be paid to the NH as their Medicaid co-pay. They get a small personal needs allowance ($35 - 90 a months) which seem to be placed in a trust for that @ the NH. This pays for the beauty shop or their cable or phone costs. If momma has a house, she can keep the house and if it is empty and not income producing, then it is an exempt asset and family will need to pay for everything on the house. Then when momma dies, whomever paid for house stuff has to let MERP know within 30 -90 days that they are filing a claim or lein for these expenses and provide specific documentation of all expenses. MERP removes these costs from their tally. MERP has to decide whether to do a claim or lein on the property and if there are exemptions. If you do nothing, MERP places a claim or a lien on the property. This has to be released in order for the property to be sold or transferred legally. This is kinda how it runs when there is a traditional homesteaded property (free-standing house). BUT if this is a multi-unit, it is an income producing property. Income producing property - like rental houses or raw land that can be sold - are assets and they are usually not exempt for Medicaid. The state will require they be sold in order for the elder to go onto Medicaid. The fact that you are living there, not paying rent, etc, make it such that you are getting a benefit below fair market value. Others are paying rent, you are not. Yeah I know you are doing stuff for her and this is compenation, but the state doesn't care about that, unless you have a legal agreement whatever you do for mom is viewed a done for love and familial duty with no compensation. This is all going to get very sticky. Get an experienced attorney to sort all this out & do it now while mom is still competent & cognitive to make these decisions.

Your mother can pay you for your services. Draw up a personal care agreement that spells out what you do for her and what she pays you.

If she has considerable savings it would be worthwhile for you to contact a financial planner or a lawyer specializing in Elder Law.