Gifting and Long-Term Care Benefits: When Generosity Can Backfire

Money gifted with good intentions can lead to devastating financial consequences when long-term care becomes necessary. This eye-opening discussion between Elder Law attorneys Greg McIntyre and Brenton Begley tackles one of the most misunderstood areas of senior planning: how well-meaning asset transfers can backfire when seeking Medicaid and special assistance benefits.

The conversation cuts through common misconceptions, particularly the damaging belief that the federal gift tax exemption (currently $19,000 per person annually) provides a "free pass" for Medicaid eligibility. As the attorneys clarify, these systems operate under completely different rules, and conflating them can lead to benefit denials precisely when you need care most. They break down the dreaded "look-back period" - that window of time where every financial gift or property transfer comes under scrutiny and potentially triggers penalties that delay essential benefits.

Beyond just identifying pitfalls, McIntyre and Begley outline strategic approaches that actually work within the rules. From specialized deeds that protect property without triggering penalties to legally-sound asset protection strategies, they demonstrate that with proper planning, families can preserve their life savings while still accessing critical care benefits. Their expertise reveals the reward in finding that balance between asset protection and benefit eligibility - ensuring seniors can receive necessary care without sacrificing everything they've built.

Whether you're planning ahead or facing an immediate care crisis, this conversation offers crucial guidance for navigating the complex maze of long-term care benefits. The attorneys' closing offer of complimentary consultations underscores their commitment to helping families protect what matters most while securing the care they deserve. Ready to ensure your gifts don't become costly mistakes? Schedule a free consultation and discover how proper planning creates peace of mind.

Episode Transcript

Greg McIntyre (00:01):
Hi, this is Greg McIntyre with the Elder Law
Report with Attorney BrentonBegley.
Hey, brenton, hey.
So, brenton, we're going totalk long-term care, medicaid
benefits, special assistancebenefits that pay for assisted
living and nursing home care,and when gifting can backfire,
like you know, what does thatmean and how can we run afoul of

(00:24):
those rules?
And really what we think isdoing the right thing is maybe
hurting ourselves or doing thewrong thing.
And I know where I see this.
A lot is where people askquestions about hey, can I give
out $10,000 to my grandkids, or$17,000 or $18,000, whatever the
taxable exemption is for theyear to my grandkids?

(00:45):
Can I do that to get qualifiedfor this benefit to pay for
long-term care later in a spenddown?
And there's other actions thatcould really really hamstring
you as well, like maybe deedingout property or drafting the
wrong deeds, things like that.
I think there's a lot of meathere to talk about, where people
really hurt themselves whenthey're really thinking they're

(01:07):
helping themselves and gettingqualified for benefits to pay
for long-term care while tryingto protect their assets.

Brenton Begley (01:14):
Yeah, that's right and you know.
So.
First thing we need to talkabout is the look-back period.
A lot of people get this mixedup.
Look-back period is all aboutwhether or not you can qualify
for a benefit to help pay forlong-term care.
So what you know the Departmentof Health and Human Services, or
, you know, veteransAdministration is concerned
about is whether or not you'vetransferred assets so as to

(01:38):
lower the amount of assets thatyou have in order to qualify for
that benefit.
Because, generally speaking,there's a threshold requirement.
If you have too many assetsthat are not exempt, then it's
going to prevent you fromqualifying.
So they don't want people justgiving away assets in order to
get qualified, and so there's apresumption that if you

(02:02):
transferred any assets within acertain window of time before
applying that, that transfer wasdone for the purposes of
qualifying, and so you have tobe able to rebut that
presumption, to show that thetransfer that was made was done
for a reason other than tryingto get qualified for that
benefit, for that benefit.

(02:25):
So that's a position that youtypically don't want to have to
be in, because it's kind of hardto prove.
Hey, I gave this away because Ijust, you know, wanted my
grandchild to have it, or I gaveit away for some other purpose.
Now if you tend to give everyyear a certain amount of money
to certain people or charitiesor organizations, then you know
you can show that pattern andgive it.
That's not necessarily going totrigger that look-back period or
run afoul of the look-backperiod.

(02:46):
But a transfer that youwouldn't have ordinarily made
and if you don't receive equalvalue in return is going to be
presumed to run afoul of thelook-back period.
And people then ask okay, well,what about this ability to give
$19,000 per person per year,given the current law with

(03:06):
regard to gift tax?
And that's very differentthat's only for gifting for tax
purposes.
So for the gift tax reportingrequirement, if you give over
$19,000 per person per year youwill have to report that okay to
the IRS.
But otherwise you wouldn'tnecessarily have to pay tax on
it unless you've given over theestate and gift tax threshold.

(03:29):
So that's kind of how those twothings work.
They get conflated quite a bit,but they're separate and
distinct from one another.
So if you're going to give agift, it has to be thought
thoroughly in regards to what itcould do and how it could
affect the possible look backperiod for some type of benefit
that you're trying to qualifyfor?

Greg McIntyre (03:48):
Sure, so so, yeah , so.
So if I do that, I'm going toessentially penalize myself and
have to cure that gift and givethat money back and then do it
the right way, right?
Or do it a way that complieswith the rules, even if it's
that federal gift tax exemptionper person per year, right?

Brenton Begley (04:10):
Correct, yeah, just because it complies with
the federal gift tax exemptiondoesn't necessarily mean it's
going to comply with the lookback period.

Greg McIntyre (04:17):
So if I get my house out like to my kids, is
that going to penalize me?

Brenton Begley (04:23):
Certainly it'll penalize you.
It'll penalize you where numberone you're going to run afoul
of the look back period, soyou're going to violate that
look back period.
Whatever the value of the homeis is essentially going to be

(04:43):
the amount that you'resanctioned before Medicaid or VA
will pay for your care.
Number two you will likely haveto report that because it's
going to be over $19,000 perperson per year.
So there'll be a reportingrequirement.
Number three there's alsoanother tax implication that if
you transfer the property as agift during your life, you're
giving your loved one that assetwith all the built-in gains.
So if they ever sell it,they're going to have much more

(05:04):
capital gains on the propertythan if they would have
inherited the property.
So you know, when it comes tothings like real property, you
don't necessarily need to giveit away to protect it.
Property, you don't necessarilyneed to give it away to protect
it.
So you know you'd be muchbetter served keeping it in your
name, under your control forthe rest of your life, but
setting it up to make sure itpasses in a way that Medicaid

(05:24):
nor any other creditor comeafter that property.

Greg McIntyre (05:27):
And there's so many other examples of how
people will wrongfully violatethe rules to disqualify
themselves from a benefit.
However, there is an answer andthere is help with that.
We know the rules inside andout and we work regularly on

(05:49):
benefits cases and have for along, long time and we help
people make the right decisionswhether it's a ladybird deed on
the house and then how to dealwith the movement of liquid
assets under the rules thatdon't violate the rules that are

(06:11):
allowed under the rules and wehelp you stay in compliance with
the rules so that you canqualify for the benefit you so
desperately need withoutsacrificing all your assets.
Very rewarding part of my joband Brenton your job.

(06:34):
Our job is to help individuals,couples, families protect
assets, stay in control ofassets and still stay open and
qualified for long-term carebenefits that will help pay for
their care.
So, in order to do that, we'dbe glad to sit down with you and

(06:59):
discuss it If you or a familymember would like to discuss
this estate planning or even inan emergency, where we can help
you stay in control of theassets, stay open to qualify for
long-term care benefits to payfor assisted living or nursing
home care and not sacrificethose assets.

(07:24):
We'd be glad to offer a freeconsult.
You can call us at1-888-999-6600 or schedule
directly on our calendars withour attorneys at mcelderdahlcom
scheduling and this is one ofthe most rewarding parts of our
job, I guarantee it, and one ofthe most fun is to help people

(07:46):
strategize under these rulesthat we know really well and we
do even more.
But wait, there's more.
We actually handle theapplication, if one is needed,
from beginning to end and wehave some of the most
knowledgeable paralegals andpeople in our industry that have
trained and are committed toour clients to make that happen

(08:08):
and just care a ton and arecommitted to our clients to make
that happen and just care a ton.
Their hearts are huge and theyenjoy really helping families
protect what they have andqualify for the care that they
really greatly need.
Give us a call, thanks.

Brenton Begley (08:21):
Thanks.