Understanding the guidelines: IRS vs Medicaid on Gifting

Isn’t it frustrating when we make a mistake simply because we were misinformed? Remember the time that you missed the bus because the receptionist on the phone told you the incorrect time? Or you missed a business meeting because you were given the wrong directions? It certainly is frustrating when mistakes happen that could have been prevented.

While working at Senior Planning Services assisting people with their Medicaid Applications, we often come across people telling us, “I wish I would have spoken to you earlier. I wish I would have known all this five years ago.” The Medicaid guideline of gifting is an area in which there is a lot of confusion and many are misinformed.

Many well intentioned professionals will advise seniors to gift the maximum amount of money according to the annual gift exclusion. The annual gift tax exclusion is the total sum of money an individual can gift to anyone without having to file a gift tax return or pay any gift taxes. This annual exclusion has no limits on the amount of persons that can receive this amount each year.

However, while gifting is certainly allowed according to the IRS, it is detrimental when it comes to eligibility for Medicaid. Medicaid does not allow ANY gifting done within the five years prior to an individual getting onto Medicaid.

Should Medicaid locate any transfers or gifts in the financial history during the 5 year look back period, Medicaid will penalize the applicant by disqualifying him/her Medicaid coverage for a period of time. Seniors must exercise caution when gifting to family and friends, and realize that they may be jeopardizing their Medicaid benefits.

We may not be able to prevent you from missing the bus or a business meeting, but we can prevent you from making errors that will impede your Medicaid eligibility. Don’t be one to say, “I wish I would have known this five years ago!” Reach out to Senior Planning Services with any questions about Medicaid guidelines. We can be reached at 1855-S-Planning ( 775-2664) or email us at info@seniorplanning.com.