Can a nursing home take money that was gifted to someone with in 5 years of the gift?

A fellow caregiver asked...

If a grandparent gifts money to their grandchildren that is put into a college fund, can the nursing home ask for that money back if the grandparent is put in nursing home within 5 years of the gift

Expert Answer

The question of how Medicaid treats gifts when considering nursing home coverage comes up for a lot of people, and is not always simple to answer. The basic rule is that, when considering nursing home coverage, Medicaid "looks back" to all substantial financial transactions that the applicant has engaged in over the previous five years. It then decides whether any of these was a gift or other transfer for less than full market value. If there has been a gift or other non-market-value transaction, Medicaid then has to make a second, more difficult decision: Was the gift or transfer made in an attempt to "hide" the funds from consideration by Medicaid? Or was it made before Medicaid was in the picture and had nothing to do with Medicaid eligibility? If it's the former, then Medicaid may still consider the amount of the gift as part of the applicant's assets.

In the situation of the grandparent who gifts money to grandchildren for college, Medicaid would look at several factors. First, there's the question of when the gift was made. If the gift was made several years before the grandparent applies for Medicaid nursing home coverage, Medicaid is more likely to treat it as a legitimate gift and not an attempt to get around Medicaid eligibility rules. On the other hand, if the gift was made close to the time the grandparent applies for Medicaid coverage, Medicaid is more likely to consider it as an ineligible transfer.

Similarly, Medicaid will look at the grandparent/applicant's physical condition and living situation at the time of the gift. Many people need nursing home care only after a relatively sudden decline in health or capacity for self-care, such as a stroke, a heart attack, or a fall. If that's the case,and the grandparent was otherwise relatively healthy and active and not anywhere close to needing nursing home care at the time of the gift, then Medicaid is more likely to consider the gift to have been made without regard to Medicaid coverage. On the other hand, if the gift was made when the grandparent's health or ability to care for himself/herself was already on a clear and steady decline such that he or she was obviously headed for or likely to need nursing home care, Medicaid is more likely to consider the gift to have been an attempt to protect the money from Medicaid eligibility consideration. So, if possible, the grandparent's (or family members') job is to show that at the time the gift was made, the grandparent was not yet close to considering nursing home care, and that the gift was therefore made without considering Medicaid nursing home coverage eligibility.

Finally, this decision by Medicaid only has to do with whether Medicaid will cover nursing home costs. If Medicaid decides that the gift was made to "hide" assets, it will deny Medicaid eligibility for a period time, the length of which is determined by how large the gift was and how much average nursing home costs are in that state. If Medicaid eligibility is denied for a time, and the grandparent needs to go into a nursing home, or is already in a nursing home, then the nursing home will have the right to collect its fees from the grandparent, or place a lien against the grandparent's property, until Medicaid begins to pay. However, the nursing home has no right to go after the gifts themselves. Once the gift is legally made, it becomes the lawful property of the person to whom it was given, and Medicaid eligibility rules do not give a nursing home any right to seek payment from that gifted money.