Can my mother help pay for her grandchildren's education and still qualify for Medicaid?
My mother owns her own home but relies on Social Security and her limited savings to pay her expenses. She wants to transfer some of her savings into a trust for my daughter to pay for some of her college expenses. She also plans to apply for Medicaid within the next two years. Could contributions to college accounts cause problems when she applies for Medicaid?
The risk your mother faces is that if she helps out with her grandchild's education expenses -- assuming she has enough money in her savings accounts -- she may run afoul of Medicaid rules regulating asset transfers and eventually find herself ineligible for Medicaid for several years.
Because she's basically living on her Social Security checks and her limited savings, your mother is probably going to be eligible for Medicaid fairly soon. If she ends up needing long-term care, her state's Medicaid officials are going to look back at all her asset transfers during the past five years, including any transfers to any grandchild's trusts or educational savings accounts. Medicaid officials will then add up the value of all of those transfers and determine a penalty period based on the amount she transferred. Until that penalty period is up, your mother won't be eligible for Medicaid coverage
As a family, there are a number of ways you can deal with this situation. If she really wants to help pay for her grandchild's education, your mother can put the money in a trust with the understanding that if she ends up needing long-term care, her children will cover the costs until any Medicaid penalty period has passed. It's always a good idea to put such agreements in writing.
If she's in really good health and doesn't anticipate a need for long-term care, then she can put the money aside and not worry. But she's got to be aware -- or an elder-law attorney has to make her and the rest of your family aware -- that any gifts to her grandchildren ultimately pose a risk to her Medicaid eligibility.
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