If a person provides gifts within five years of the Medicaid application, then the County Board of Social Services will presume that those gifts were provided for Medicaid planning. The individual who provides gifts within five years of the application will be denied Medicaid for a period of time known as the penalty period. The duration of the penalty period is based upon the value of the gifts provided by that individual.
Many people mistakenly believe that they can gift up to $15,000 per year and that this will not have an effect on Medicaid eligibility. This is absolutely false. Medicaid does not allow a person to gift up to $15,000 per year without jeopardizing eligibility for assistance.
The IRS allows a person to gift up to $15,000 per person each year without having to file a gift tax return, known as Form 709. If a person were to gift more than $15,000 in one year to a person, then the individual who provided the gift would have to file a gift tax return.
Medicaid does not recognize or follow the rules set forth in our tax code. There is no exemption for a gift of $15,000 or less in the context of Medicaid eligibility. Although a gift tax return does not have to be filed for that gift, it will have an impact on that individual’s ability to acquire Medicaid to pay for long-term care.