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IRS GIFTING V.
MEDICAID GIFTING
A
commonly asked question concerns a person's ability to give $12,000
per year, to any number of individuals, without incurring a gift tax
from the Internal Revenue Service.
Although
this is a perfectly acceptable mechanism to "spend down" for
death tax purposes, it runs at odds with Medicaid.
In short, if such transfer was made within the past 60 months
of applying for Medicaid, it subjects that person to a penalty.
In
order to determine the nature and extent of the penalty, one takes the
$12,000 and divides it by $6,942 (the NJ Medicaid divisor).
The result is 1.73. For all
intents and purposes, Medicaid
rounds it to the next higher decimal. Consequently, a transfer of $12,000, within the 5 yr. lookback period results in a
two month penalty.
Translated,
this means that the person must wait two months (penalty period) before
applying for Medicaid. Consequently,
that person must find another way to pay for long-term care for those
months.
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