The Medicaid gifting penalty is a period of ineligibility for Medicaid. What happens is that when someone applies for Medicaid, Medicaid is going to ask, “Have there been gifts made in the past five years?”
If the answer is yes, you’re going to say, of course, yes and explain how much those gifts were and what are those gifts that were made. Medicaid then adds up all those gifts and divides it by an amount that is estimated to be the average cost of care for nursing homes in North Carolina. At the moment, in 2015, that cost of care is $6300 a month.
So if someone’s made a gift in the past five years, and all the gifts added together, let’s say added up to $63,000, in that situation, then there would be a 10 month period of ineligibility for Medicaid, after the person applies for Medicaid.
That’s a long time when there is no other money available. Families are going to have to come up with those resources to pay for the care of the money that has already been spent, that’s often not an option.
That’s why when people ask, “Can we make gifts?” the answer is yes, but you want to do it in a smart way. We want to make sure that those assets remain in place, usually through the right type of trust planning to ensure that the parents’ care is going to be covered if a nursing home stay is needed.