Do I Have To Report Mom's Gift To Medicaid?

by Chris Dolinski
(Nashville, TN)

Question:

My mother is in a nursing home in rural Virginia. I have a power of attorney on her bank accounts and have taken approximately $40,000 over the past three years to pay for a car and some home improvements. my mother has been privately paying her nursing home expenses for about three years but now her resources are running out and we need to apply to medicaid soon. My question is what should I do about the money that was transferred? Should we wait to apply for medicaid and somehow privately pay by taking out a loan or should we apply now and pay the money back into my mothers account?

Also, what documentation is needed to apply for Virginia medicaid? What i mean by this is will Virginia discover the transfers if I do not disclose it? All transfers are more than two years old at this point. Any help you can give me I would appreciate.

Answer:

If the home improvements were made on your mother's home, then they are not a gift to you. If they were on your house and not hers, then they were a gift to you.

If the money was for a car owned by your mother and used to drive your mother or another household member around, then it is an excluded asset of any value and not a gift. If not, then it would be a gift to you.

Any gifts made before February 8, 2006 would be ignored, but apparently these were made after that date, so must be counted.

If a gift is counted, that means that your mother would be unable to receive Medicaid for a certain number of months, depending on the applicable "penalty divisor" for your state or region. For instance, if the divisor were $5,000, then a gift of $40,000 would cause a penalty period of 8 months. That means that even if your mother would otherwise be eligible for Medicaid, the state will not pay for her for 8 more months.

You can always reverse the gift to reduce the penalty period resulting from the gift, but then you'd have to come up with $40,000 to give back to your mother. Once the money is back in your mother's name, you can do "crisis" Medicaid planning, discussed in detail in my book -- Medicaid Secrets.

The state Medicaid application forms require you to list all gifts made within the past 5 years. Intentionally omitting anything is fraud against the state, a very serious offense punishable under both federal and state law.

As you can see, the issues around gifting and whether to reverse or not can be complex, and I strongly suggest you work with an experienced elder law attorney familiar with Medicaid planning in your state. Best of luck!