Medicaid/TennCare: What Counts as a Gift?

When a loved one’s health takes a turn for the worse or the loved one enters long-term facility care, family members often plan to give away excess assets in order to meet resource limits and gain Medicaid benefits.  If you find yourself thinking along these lines, stop now!  This common mistake has severe consequences if it is carried out without the guidance of an experienced legal professional.

An application for Medicaid benefits involves an examination of any gifts and transfers made within the five years leading up to the application date.  This is called the “lookback period.”  Any asset transfers for less than full market value from either the applicant or their community spouse will be scrutinized and will typically lead to the application’s denial.  Then, based on the value of the transfer, a penalty period is established.  This is a period of time during which the applicant cannot receive benefits.  For the duration of the penalty period, the applicant will be stuck paying for expensive facility care out of private funds.

Not all types of assets and transfers are equal in the eyes of Medicaid.  So what counts as a gift?  Almost any transfer of money or assets for less than full market value to someone other than the applicant or the applicant’s spouse is considered a gift.  Some common examples are paying bills for a child or grandchild; tithing or donating to a charity; waiving inheritance; removing the name of the applicant or his/her spouse from bank or other financial accounts; and setting up an irrevocable trust.

However, some gifts and transfers are exceptions to the rule and will not cause an applicant to be disqualified.  Transfers of certain assets to particular relatives may not result in a penalty period.  These types of relatives may receive gifts or transfers without disqualifying the applicant:

  • The applicant’s community spouse;
  • The applicant’s child under age 21; and
  • The applicant’s special needs or blind child of any age.

An applicant may transfer his or her homestead to any of the family members listed above or to these additional family members:

  • A sibling or half-sibling who has equity interest in the home. The sibling must have lived in the home for at least one year immediately before the applicant entered facility care.
  • A caregiving child who has lived in the home for at least two years immediately before the applicant entered facility care.

When an applicant is over-resourced for Medicaid qualification, there are many other strategies available to “spend down” excess resources and obtain benefits.  For instance, transfers to certain types of trusts for the benefit of a relative with disability may not result in a penalty as long as the trust complies with Medicaid guidelines. An elder law professional can determine if a transfer meets one of the exceptions to the asset transfer rules.  It may be necessary to assemble proof to convince the TennCare representative that the transfer should not disqualify the applicant.  Seek assistance from a qualified elder law attorney to help guide you through the process and assemble the proof you need to file a successful application.