Does spending a cash gift on Dad's medical bills fall back to Medicaid assets?
This question is regarding the Medicaid look back period in New York State.
Facts: Elderly person gifts cash to a family member Elderly person files gift tax return and pays no tax Family member spends 100% of gifted cash and earned interest on elderly person’s medical bills (excludable from gift tax)
Question: Would this gift be excluded during the Medicaid look back period since fair market value has been returned to the elderly person?
Thanks for your help
Russell
Expert Answer
Hi Russell,
I will share with you what I know from my own experience with Medicaid concerning gift assets paying for medical bills part of Medicaid lookback.
Technically,the elderly person made a gift to the family member. The fact that they complied with federal tax regs and filed a gift tax return has no bearing on Medicaid. For the gift to be reversed, the family member would have to return the cash gift to the elderly person, who would then spend the money on his/her care. This is what Medicaid looks for.
Medicaid will tell you that you are not responsible for your parents bills. So they could contend that the elderly person made an invalid transfer and will be penalized.
My question is "why would you do this"? The transaction makes no sense to me.