Some people believe that Medicaid doesn’t look at gifts of under $14,000 per year. Elder law attorney Dennis Toman explains why that is not good Medicaid advice.
I have families that come in and we’ll talk about how Medicaid works in the gifting penalty. I explain how Medicaid imposes a period of ineligibility for any gifts that are made in the last five years. And many times families will ask this exact question, “But I heard that I could give away $14,000 a year, or sometimes it is $10,000 a year, and that was okay.”
Well, it’s important to understand that gifting rule for a gifting exemption of currently $14,000 a year is a gift tax rule. In other words, if you give away up to $14,000 a year per person, there is no requirement to file any gift tax return; it doesn’t affect the amount that you can give away during your life time.
However, that rule has no effect on Medicaid. Medicaid starts counting gifts from the very first dollar that’s gifted. Now, some nominal gifts of typical birthday gifts or Christmas gifts or other types of you know, family, normal gifts, Medicaid is not going to hold those against you. But we may have to explain them if they start to get sizeable and to $500 or a $1,000 dollars or even more. We’re going to have to explain to Medicaid exactly what was gifted, and how much was gifted. It’s going to have an impact on delaying future Medicaid benefits or any gifts that were made within the five years prior to applying for Medicaid.
So, your CPA was right, you can make a gift of $14,000 a year without accounting for gift tax purposes. But it will count against you for Medicaid.