by Larissa Bixler Stein

“Dad supported my brother when he was out of a job for awhile.”

Mom gave her grandson her car when he went off to college since he needed a car and she wasn’t driving anymore anyway.”

“We brought Dad to live with us a few years ago, and he decided to contribute to the cost of our kitchen renovation as a way of saying thank you to us for letting him stay with us.”

“When Mom moved into independent living, she sold her home to my daughter at a substantial discount.  My daughter was going through a difficult time, and it was such a blessing to her.”

These are beautiful acts of generosity, and I have no doubt that offering the younger generations a hand up can be very fulfilling, especially as one grows older.  However, when I hear about these wonderful gifts from people who are in my office because their aging parent is in a nursing home, is running out of money, and needs Medicaid to help cover the staggering costs of care, I cringe.

The Department of Social Services (DSS) has very strict rules for Medicaid qualification, and one of those rules is that the applicant cannot have made any large gifts within five years of applying.  This five-year period is referred to as the “lookback period,” and if gifts were made during the lookback period, DSS imposes a transfer penalty.  The transfer penalty means that Medicaid will not pay for care for a period of time, the length of which depends on the amount of the gifts.  Keep in mind that someone must be almost out of money to apply for Medicaid in the first place, so they will not have the money to pay for their care during the transfer penalty period.  This is obviously a significant problem for the family to resolve.

DSS very rarely accepts rationalizations for gifts no matter how sensible, and there are a lot of misconceptions about what is permissible, which Part II of this article will address.  Therefore, someone who does not have either adequate long-term care insurance coverage or enough savings to cover at least five years in a nursing home must be extremely cautious about making gifts as they grow older and become more likely to require long-term care.  The rules on this subject are complicated, nuanced, and very fact-specific, so if you have questions about your circumstances, please reach out to a qualified elder law attorney.

Larissa Bixler Stein is an attorney with Garrity & Gossage, LLP whose passion is helping those in North and South Carolina provide a more secure future for themselves and their loved ones through Wills, Trusts, Powers of Attorney, Guardianship, Probate, and Elder Law Services. Please note that this article is intended for general information purposes only, and is not legal advice. Legal advice depends on the specific facts and circumstances of each individual’s situation. Those seeking specific legal advice or assistance should contact an attorney.