Gifting can affect your MassHealth eligibility (also known as Medicaid) for long-term care. Many Massachusetts residents aged 65 and over find they need MassHealth coverage to help with nursing home expenses. MassHealth is designed to pay for long-term care once a person’s funds and assets are extremely limited. Eligibility criteria for MassHealth focuses on an applicant’s countable assets and their income.
When someone applies for MassHealth, MassHealth has the right to examine the applicant’s bank and financial records for up to five years immediately prior to the date of application. This look-back period is designed to prevent people from transferring assets to others at the last minute so that they can qualify for MassHealth.
Typically, MassHealth looks for gifts/transfers of $1,000 or more. If they discover any in your financial records during the previous 60 months, whether to a trust or to another person, they will impose a penalty of a disqualification period on your eligibility, meaning you won’t be eligible for MassHealth for a period of time. In other words, you’ll be penalized for any gifts you have made during the five years preceding your MassHealth application, regardless of the purpose of the gift. The length of the disqualification period will depend on the amount of the gift. Penalties can be “cured” by the return of the gift to you.
How does gifting affect your eligibility for MassHealth? Let’s say you gave your granddaughter $5,000 toward her college education two years ago and gave your son $8,000 to help with home repairs four years ago. If you’re now applying for MassHealth for long-term care, you would be disqualified from getting MassHealth for a period of time because of those gifts. If your granddaughter and son repay you the money you gifted them, that’s called a “cure.” Once you’ve spent down those countable assets according to MassHealth guidelines, you could then become eligible for MassHealth if all other eligibility requirements are met.
If you or a loved one is a senior who might need MassHealth for nursing home care in the future, here are 5 tips about gifting and planning for MassHealth eligibility:
1. Keep track of all transactions of $1,000 or more. It’s okay if you’re spending the money on yourself, but you’ll need to prove that when applying for MassHealth if the expenses are within five years of your application date. If you spend money on things like a vacation, a car, or a renovation on your house, keep the receipts and all paperwork from those transactions.
2. Your MassHealth application must also include five years’ worth of copies of all cancelled checks for $1,000 or greater, along with an explanation for each of those expenses. You should also keep credit card statements in case you need them to provide proof of what you bought for $1,000 or more.
3. When you apply for MassHealth, you’ll need to provide printed statements (or passbook records) for the previous five years for your bank accounts, IRAs, 401ks, investments, stocks, and annuities. If you’re getting paper statements every month, put them aside in a folder so you’ll have them when needed.
If you do online banking, you can usually download a PDF or order a paper version by mail from your online banking page. You can also call your financial organization’s service number to get statements.
You can gather the statements now or wait until you need to apply for MassHealth and ask for them then. Some financial institutions charge for mailing you monthly statements and some charge a fee when you request a bulk of statements at one time.
4. Copies of stock certificates, savings bonds, and complete brokerage account statements and/or complete mutual fund statements for the previous five years will need to be given to MassHealth when you apply. If you’re receiving paper statements, keep them with your bank statements. If you manage your accounts online, you can call the organization’s service line for directions on how to download statements or get monthly paper statements. Ask them what fees may be involved.
5. If you just transfer money from one account to another, keep the statements to prove those transfers.
6. People often get confused between the IRS gifting rules and the MassHealth gifting rules. In 2023, the IRS allows you to gift up to $17,000 of property or cash to as many people (other than your spouse or dependents) as you want without having to pay any taxes on the gifts. For a married couple, the exclusion amount is $34,000. That means you could give $17,000 to each of your three grandchildren in 2023 and there would be no tax.
When you apply for MassHealth, any gift you made within the five years prior to your application date will be seen as disqualifying transfers of assets, resulting in a penalty period for you.
If you’re thinking about making a gift or planning to apply for MassHealth, it’s important to talk to an experienced Massachusetts elder law attorney. You want to make sure you make the best choices now, so they don’t impact you negatively in the future. Contact us today for a free consultation, so we can help you make the decisions that are right for you.