How Scrutinizing is Medicaid Really? Part 1

I had a conversation with a client recently about avoiding potential Medicaid penalties if and when she is ready to file a Medicaid application.  She asked me a question I get often.  “Is there an amount I can gift that is small enough that would not trigger a Medicaid penalty, say for birthdays or holidays like Christmas?”

In order to answer that question, we must first understand the rules that apply to what Medicaid calls “transfers for less than fair value”.  These are transfers of assets from the applicant (or the applicant’s spouse) for which the applicant (or the applicant’s spouse) did not receive something of equal fair market value in product or service in return.

A gift is a transfer for less than fair value because clearly, there is no product or service received by the maker of the gift.  If there was, then it wouldn’t be called a gift.  Under the Medicaid rules as written, any transfer is counted no matter the value. There is no stated amount which is exempt from the penalty rules.

“But, isn’t there a small amount that is acceptable?  Won’t Medicaid ignore the gift if it’s a nominal one,” my client asked.  The answer to that may be different depending on the state you live in.  It also is very different here in New Jersey now than it was 20 or 10 or even 5 years ago.

I’ll explain next week.