How much money can Mom gift me without raising red flags with Medicaid?

Your mother can pay you for your services. Draw up a personal care agreement that spells out what you do for her and what she pays you.

If she has considerable savings it would be worthwhile for you to contact a financial planner or a lawyer specializing in Elder Law.

There is no threshold from Medicaid on gifting or transferring $.However gifting will trigger a transfer penalty. Medicaid is a needs-based program and as such they are limited to about 2K in "income" and about 2K in non-exempt "assets". The exact amounts are set by each state as the states administer Medicaid under a general federal guideline.

If mom has considerable savings, take part of that and get all her documents together (bank statements, info on marriages, birth and deaths) and go see an elder care attorney so that you can do this right and within compliance of your state laws and approach to Medicaid. They will present options. Some of them will likely involve a financial advisor. If you think they will need Medicaid, you just need to make sure whatever you do will be Medicaid compliant.

There is a HUGE difference in between gifting $$ and transferring $$ when it comes to the elderly. Anyone can gift $$ - this is an IRS and tax issue.
But for Medicaid, $$ transferred (gifted) by an elder to another and not specifically for their care or their needs with proper documentation done (like the personal care agreement Jeanne suggested), can trigger a transfer penalty under Medicaid. Transfer penalty inquiry can be very detailed and the state usually has the upper hand as they have the documents that show a transfer in the first place. Medicaid can do a full 5 year review. So if mom when into a NH today and applied for Medicaid, that would mean you must provide whatever her state wants back to 2008; or forward to 2018. Either way that is a looooooong time.

About the house, what you are talking about is MERP - Medicaid Estate Recovery (or Recoup) Program. All states that take Medicaid $$ must have a MERP program in place. There are exemptions on MERP for family who are full-time caregivers, cost of maintenance on empty homesteads; heirs who are themselves on another state program for the at-need; etc. Google your state's program.

BUT I think you are going to have a much bigger issue with the property. It sounds like this is an income producing property and a multi-unit? My answer is based on this. An elder's homesteaded property is an exempt asset under Medicaid rules. They can keep it forever (in most states) as an exempt asset for Medicaid. BUT there will be NO income from them to pay for anything on the house (like taxes, insurance, etc) as all their income must be paid to the NH as their Medicaid co-pay. They get a small personal needs allowance ($35 - 90 a months) which seem to be placed in a trust for that @ the NH. This pays for the beauty shop or their cable or phone costs. If momma has a house, she can keep the house and if it is empty and not income producing, then it is an exempt asset and family will need to pay for everything on the house. Then when momma dies, whomever paid for house stuff has to let MERP know within 30 -90 days that they are filing a claim or lein for these expenses and provide specific documentation of all expenses. MERP removes these costs from their tally. MERP has to decide whether to do a claim or lein on the property and if there are exemptions. If you do nothing, MERP places a claim or a lien on the property. This has to be released in order for the property to be sold or transferred legally. This is kinda how it runs when there is a traditional homesteaded property (free-standing house). BUT if this is a multi-unit, it is an income producing property. Income producing property - like rental houses or raw land that can be sold - are assets and they are usually not exempt for Medicaid. The state will require they be sold in order for the elder to go onto Medicaid. The fact that you are living there, not paying rent, etc, make it such that you are getting a benefit below fair market value. Others are paying rent, you are not. Yeah I know you are doing stuff for her and this is compenation, but the state doesn't care about that, unless you have a legal agreement whatever you do for mom is viewed a done for love and familial duty with no compensation. This is all going to get very sticky. Get an experienced attorney to sort all this out & do it now while mom is still competent & cognitive to make these decisions.

You need to see an elder law attorney that can draft a care agreement that will permit her to pay you for services. My understanding is that you can be paid for home care what is customary in the area where you live. But, you cannot be paid anything prior to the care agreement being in place. A lump sum payment is permitted in a care agreement but must be documented as so. When you have been caring for her for two years, the house can be transferred to you without Medicaid penalty, if you also use that address.

Unfortunately, there is no minimum amount that can be gifted to avoid the Medicaid penalty. All gifts made within the five-year period immediately prior to the date your mother applies for Medicaid are added together to figure out her penalty period. The penalty is equal to the total amount gifted divided by your state's average monthly nursing home cost (set by each state annually); that figure is the number of months that Medicaid will not pay for your mother's care (i.e., the penalty period).

The two-year rule you refer to requires that you provide such care for your mother that BUT FOR SUCH CARE she would have needed to move into a nursing home, and such care is provided for at least the two-year period immediately preceding the date your mother eventually enters a nursing home. If you can document that, then your mother can then transfer the home to you without it causing a Medicaid penalty. You should be sure to get a physician's statement to back this up. You must live in the same unit as your mother, not just in a different unit in the same multi-family dwelling.

Others have suggested you have an attorney draw up a Personal Care Agreement, which will permit your mother to transfer money to you in exchange for your care for her. That's a good idea; but remember that those amounts she pays you must be reported as taxable income, on your income tax return.

None. In the likely event that she needs Medicaid, they will look back for 5-7 years and if they see red flags, they can go back further. Property is not exempt. I have learned all of this the hard way.

Curious,how would they tell the difference between gifts/transfers, and monies which the senior might have just spent lavishly? For instance, what if the bank statement shows the senior cashing out around $3000 a month, but he/she just explains it as "I took it to the casino"? How do they know they didn't just turn around and hand a stack of cash to a family member... And, voila,the money is transferred? Or, will they also punish the senior for how they chose to SPEND their own money?

Regarding the comment by sirpsychosexy, below: It's true that the state government workers do not follow the senior around to verify what they tell them. The same is true when you file your tax return, if you are in a cash business. However, when you sign the tax return (or Medicaid application) you are obligated to report accurately, completely, and truthfully what actually happened. To do otherwise invites a charge of fraud, which incurs both jail time and fines. In situations other than gambling, the state Medicaid department will ask to see receipts for purchases or other documentation to prove that the funds were spent on something and not gifted to a family member.

Regarding terrim's comment: The "lookback period" is limited to 5 years prior to the date the individual applies for Medicaid. Any transactions outside of that period may not be considered by the state when a person applies for Medicaid. Also note that in some states income-producing property--of any value--is exempt for Medicaid purposes.

sirpsychosexy, are you asking if it is possible to lie and not get caught? I suppose so. Not everyone who cheats on their income taxes gets caught either, I suppose. I still wouldn't recommend it.

If your mother has "considerable financial savings," then why would she need Medicaid to pay for her care? Medicaid is for impoverished people, not for people who've hidden their assets. Beware. If you do go through with trying to transfer the money, you should not do it on your own with advice from the internet. Plenty of people try this and plenty get caught. So, if you hide the money, don't spend it because in all likelihood, you'll have to have it on hand to pay for Mom's care when Medicaid won't. Another option you could consider, if you're looking to preserve your inheritance, is to care for her yourself. Don't ask the government for a handout and they'll stay out of your business. You can keep every penny.

Relax, I'm just asking hypothetical questions. It seems like in a couple of the responses, it's being suggested that I'm trying to do something illegal. We are not extremely knowledgable about these matters (hence, why I'm on a support board to familiarize myself) but have heard the horror stories about people having to undergo extended hospital stays and watching their entire savings, which they've worked for all their lives, get taken in a matter of weeks. Personally, I'm gainfully employed and not in bad shape myself... if my parent wants to leave things to me, that's great. But if everything she worked for is just going to go up in smoke, I'd just as soon advise her to go take a cruise around the world, go to Vegas and enjoy what she worked for.

I've wondered too about the question of how an elder spends his or her own money and then applies for Medicaid when the money runs out. It doesn't seem right for someone to spend lavishly at the casino or go on a cruise around the world when he should be saving for possible long-term care needs in old age. I agree it seems a little unfair, because any one of us could drop dead tomorrow, and the person might want to enjoy his money while he can. But if people are going to ask others to pay for their care when they run out of money it seems reasonable that they should live frugally and do what they can to make their resources last as long as possible. What do others think? Does Medicaid look at how frugally or how lavishly the senior lived prior to application for assistance? And how far back should Medicaid look? I mean, if a 45-year-old took a round-the-world cruise would that be considered extravagant when the individual is probably decades away from needing Medicaid anyway? I'd like to hear from others on this.

Medicaid only looks for uncompensated transfers (i.e., gifts) made within the five-year period prior to applying for Medicaid. If the applicant wants to blow money on trips and gambling, those are for the applicant's own benefit and not a gift, so does not affect Medicaid eligibility.
Indeed, virtually all other government needs-based programs simply look at the assets the person has currently and don't even go back to look for gifts, like Medicaid does. The government can't get into forcing people to live one kind of life over another, perhaps much to the chagrin of the hard-working and frugal neighbor who saves and then pays for his own medical care or nursing home care who looks across the street to see his profligate neighbor who never saved and/or gambled his money away over a lifetime, and now seeks government benefits of various kinds.
What alternative is there?

Yeah, it is a little unfair. Life is a lot unfair, as I suspect you've noticed.

If a 45-year-old goes on an extremely expensive cruise and then at age 49 becomes disabled and needs to apply for Medicaid, the cruise will not have any impact on the application. She spent the money on herself, which is allowed. You might say it is unfair that she gets to apply for taxpayer assistance after spending so lavishly. She might say it is unfair that she got this disabling condition that she never expected and did nothing to cause or deserve.

"Fair" and "unfair" don't seem to have much to do with health issues.

Thanks to attorney Heiser for his answer above. I've heard that some states have filial responsibility laws where relatives can be asked to pay for nursing home care for someone who runs out of money. I think my question of fairness comes into play in such circumstances. If adult children urge their parents to save, but Mom and Dad blow their money on gambling and later run out of resources, is it right to force the adult children to pay? If they have no ability to control their parents' spending (and their parents are competent adults), then why do they have a responsibility to pay their parents' bills? I don't understand these filial responsibility laws and would like to know more about them. Thanks!

SwimmerToo, and what about the parents who were abusive or neglectful or just plain not there for their kids? I really "don't get" filial responsibility laws, either.

I live in one of the states that has such a law. The law is rarely enforced, but there have been a couple of cases lately and, I predict, as baby boomers age and the numbers of those seeking Medicaid payment for skilled nursing increase dramatically, the state will go after families more and more unless those laws are taken off the books. When those laws were written, there was no way for a parent to consume $10,000+ in health care each month in their final years.

Regarding so-called "filial responsibility" laws, i.e., forcing the kids to pay for a parent's nursing home bills if the parent is broke, here's a nice chart showing the various states that have filial responsibility laws:
http://tinyurl.com/8b89b9d

Clicking each state will bring up a description and citation of that state’s law.

On what basis do those states believe adult children have an obligation to pay for their parents nursing home care? What if the adult children are struggling financially or have their own children to educate and care for? I would like to know more about the thinking behind these filial responsibility laws. Again, if adult children have no control over their parents' spending, how can they be asked to pay their parents' expenses?

First of all, as I understand it, these filial responsibility laws are not often enforced. When they are, there's usually a 'means testing' sort of provision in the laws that tries to limit responsibility only to children who can afford it. They do take into account that the adult child has others relying on them for support.
Let's say Bill Gates' mom is indigent and has to enter a nursing home. Should the taxpayers really pay for her care considering the wealth of her adult son. On the other hand, let's take an average American, me for example. If my dad made so many poor financial decisions that he finds himself at age $80, scraping by on $1,200 a month in social security and has no assets and I'm paying college tuition, mortgage, AND supporting him with a few hundred a month, should the state bankrupt me to pay his nursing home bill? What purpose would that serve? And, as you've all pointed out, parents can legally control their kids, kids can't legally control their parents, so why should they be financially responsible for them? If I'd somehow taken my dad's money from him in order to save him from himself, I could literally have been arrested for theft.

Sirp - Medicaid is needs-based and the state has the ability to require years and years of documentation to accompany the Medicaid application.

Isn't easy is spot-on about this.

Some state have contracted out compliance and MERP to outside firms. If your state has done that, then you will be stuck in paperwork hell and likely have a significant transfer penalty and perhaps even fraud issues and never get a MERP release on the property till it all is cleared. None of this should be taken lightly if you are planning to play games with reporting assets and income. And it is NOT just do the initial Medicaid application and then no worries. I have to do an annual re-certification on my mom's Medicaid application and there are specific ? regarding her home - like homestead exemption details, status on property, income producing, ownership change or future change (like a life estate done). All of this signed off on by me as her representative with a clear paragraph on fraud & penalty for nondisclosure, yet another MERP acknowledgement and then added this year another form specifically on the details on the status of her home. Oh and for even more fun, all due 13 days from the date on the letter. I always get it either the day after it's due or on the due date too. I know it's coming so I have the documents together and fax them asap. But my point is Medicaid compliance is constant and ongoing for the rest of their life on Medicaid.

You do realize that the income producing multi-unit property will always be an issue as the state can and will place a claim or a lein on the property as a part of the compliance required in order for her to get Medicaid? This isn't the state being mean but they have to do this in order to get federal funding for Medicaid. The claim or lein will show up if you ever go to sell the property too and can queer any sale. You have to disclose it also on the Realtor form as to the status on items on the property, just like you have to disclose if there was ever a flood claim or foundation issues you are aware of. If you don't and the buyer has to wait to close, they can sue you for the costs lost due to this or even worse get this and out of the deal and all their earnest $ back. You will have to get a release from MERP in order for the property to get a clear title in order for a warranty deed to be done.
Banks and mortgage companies require this before any money is lent too. There is no easy sure way to get around the Medicaid requirements nor should there be. If there was then everybody would spend every penny of Momma's $ on themselves and not her; put her in a NH on the state tit and within short time there would be no state support of NH for those who are at-need as the system would collapse.

Filial Laws and Medicaid Estate Recovery Program will indeed become the wave of the future. American society has become an entitled entity of government handouts at taxpayers expense. Sooner or later the money is going to run out and medicaid will no longer cover NH's. Medicare is also in danger of not being sustained in the future. People need to start taking responsibility and use their assets for their care instead of saving it for an inheritence. When the money is gone then medicaid assistence is justified.

Thanks for your helpful answer, "Isn't Easy". I agree -- if Bill Gates' mother were indigent there is no reason he shouldn't help her out because he is totally able. On the other hand, I read in these blogs about adult children frustrated over their parents' imprudent spending, perhaps even resulting from an undiagnosed dementia, and they are unable legally to do anything about it. I think most adults already help their needy parents as they are able, but looking at today's young people I see that many are struggling in a bad economy, burdened with crushing student loan debt, earning stagnant wages (if they are so fortunate as to be employed) and facing a bleak old age themselves because defined benefit pensions are extinct and 401(k)s just don't provide what people need, given the many years folks live in a state of frail and extreme old age. Long-term care in a nursing home is so incredibly expensive ($70,000 to $100,000 per year) that no ordinary middle class person can afford it. I'd like to see another major government insurance program, similar to Social Security, that would provide long-term care for everyone. We'd all be required to pay into it and it would be there for us if we need it. It would certainly provide a great deal of peace of mind.

Debralee - Filial laws...well that I doubt those can be done successfully. The Pennsylvania case was more about a daughter who refused to pay for care after signing a contract and filial was used by the NH to enforce the judgement.Most states don't have their law still based on old English which is what filial is. My state is actually French based and totally different on how it views heirship.

But MERP is required since the early 2000's for states to participate in Medicaid. Most states recovery rates are low to begin with as compared to how much the states spend on NH Medicaid. It is the whole having contracts let out by the states to companies to do MERP under the guise of being a state unit in which they get paid by performance or % of revenue collected that is the new wave imho.

My gut feeling is that for those states that do this, there will be the appearance of lots of recovery $$ back to the states from the proceeds of the home.For state that view intestate deaths property as being escheated to the state, there will be alot of $ back as it is costly for family to establish a lineal heirship and get all the legal done by ALL the possible heirs. Those states will get $$ via MERP. But once folks realize that having momma's house means that MERP will get it, then what they will do is just to let it fall to ruin and walk away as there is no benefit to maintaining the home unless you are very OCD on keeping records and doing everything in a quick time frame to file your exemptions. Which face it, isn't what most folks do. The market will be glutted with a ton of old lady homes, filled with decades of old people crap in them and years or decades of delayed maintenance. Most in older, declining neighborhoods. Bad for real estate market.

MERP was though of and written back in early 2000's when real estate was totally a go-go world and value did nothing but increase. Not so now or in the near future.

personally I think the exempt asset status on homes will be changed and the states will start requiring the home to be sold if there are no exemption)s) filed within the first year of their stay @ the NH. The smart $ will have homes owned by LLC's or other entities which cannot be touched ever if the property is worthwhile.

What all this discussion when you 'cut to the chase', amounts to is that for proper planning purposes: You MUST meet the 5 year look back stipulation according to DRA 2005. That is plain and simple, there is no "home brew' solution.
Why did they they come up with a 60 month look back? simply stated because people will not plan out, and they (gov't) know it!

Folks ask me: "well when is the proper time to start"? In the case of the under 50 person who ran into a catastrophic event , simply it was reasonably unexpected.
In terms of those who are over 65, and maybe in the seventies or more, that clock is beginning to tick. .... but when.???.. it is a guess we can't predict the future.
Key elements are the family dynamic; can parents trust the children? transfers must be irrevocable, BUT THAT PARTY MUST BE ABLE TO "REPAY THE GIFTING" if one does not get over the 60 month period, and Nursing/ home care is required.
It stands to reason also, that the intention must be to provide for the parent as needed, if that unexpected situation develops before the 60 month. and even after; such as placing the person in a private pay nursing home, and upon Medicaid eligibility SUPPLEMENTLING Medicaid care by paying additional (private room, extra attendant care, etc)
Keep in mind this NOT advice intended to be construed as "legal" counseling.
The fallacy of a quit claim deed (property) {bad idea},[that's a simple solution often contrived by a 'know it all', who is usually somewhat ignorant of the consequences], is evident when it is clear an asset was transferred at less than fair market value, or the recipient goes to sell the property and is then subject to FULL taxation, in contrast to an Irrevocable Grantor Trust.
Did the recipient sell the property before passing 60 months and a day? OMG!

There are many vehicles that satisfy the 'transfer' and retain 'devices to "repay the gift", again the family dynamic is of utmost importance, If the child or Children do have pure intentions , then the parents or giftor can be left in a precarious position and become ineligible.(for Medicaid).
It is additionally important that (money) asset transfers, and property as well be protected from attachment by creditors, & predators, opposing lawyers, Nursing home etc..
The use of proper trusts is one method, I have also used (and naysayers please check the facts before contributing misconceptions or inaccuracies) Single Premium Life Policies (certain ones), that increase the estate value immediately, provide some rehab/LTS benefits {based on the face value!}
and allow for return of the initial amount if needed, important!, (without penalty).
That is especially useful if it involves $$ the parent or owner of the funds intended to pass on upon death anyway.... A CD in the bank designed as POD (pay on Death) for 50,000 might yield slightly more, but not significant, than the original amount, & has NO protection from attachment, but the SPL, gains significant value immediately, and IS protected from predators, has LTC benefits, and is liquid.
It is also a great tool for charitable giving. As long as owners follow the rules
It can be owned by a trust or individual, In many instances saves the necessity /expense of a trust, based on individual situations.

As a caregiver a specific agreement must be drawn up as mentioned in an earlier answer, Payments made must be reported and care should be under the supervision in some way of a licensed (in the area of care), professional at regular intervals, and records kept of actual performance. Especially important if retaining the house is important (Medicaid Estate Recovery)

The Rockefellers did not retain all their wealth by 'owning' it all themselves.

Correction... "IF the children DON"T have pure intention.....

This question is an insult to society! You want to spend your Mom's money, and
then ask your tax paying neighbors to pick up the tab for her future care. People like you live in a dream world of easy entitlement. The government has no money. They only spend ours. So pay your own way, and forget cheating the rest of us!

I am confused. If your mother is in good health (dementia-wise), lives on her own (with help running errands, etc.), and has "considerable savings" why are you even considering Medicaid? Medicaid if for people who are truly without funds to pay for their care. Now, if you were to spend all her "considerable savings", then she might qualify for Medicaid, but as the attorney states, that five year period BEFORE is the catch. Just act like a loving daughter, and do all the things she did for you as a child, and stop worrying about the day which might never come. This nurse thinks you have some evil thoughts.

Why is okay for Apple to shift billions of dollars (literally) of taxable income to other countries, to minimize their tax exposure (all perfectly legal), and then have their CEO indignantly stand up in Congress to declare proudly that Apple pays every dollar of taxes it owes, but it's not okay for a person to save their hard-earned assets and still qualify for Medicaid, by also availing themselves of Congressionally approved legal techniques?

Wow, it's always amazing how there will be an idiot or two in every cyber-crowd, thinking that they know someone and jumping to conclusions based upon a few paragraphs on a discussion board.

My mother is all about saving money and investing it, and WANTS to give a certain amount to me to invest for the future. She has worked her entire life to save it, and she's not about to check into a nursing home, but wants to do this for me with HER money.