Oct
30
2018

Can I Give Each Of My Children $15,000 a Year and Still Qualify For Medi-Cal?

You can give $15,000 to each of your children per year under IRS rules, but there may be penalties if you apply for Medi-Cal within 30 months of the date of the gift. Under IRS rules for the year 2018, you can give away $15,000 or less to any number of individuals, without having to report the gift to the IRS. If you give away more than $15,000 in a single year to any one individual, other than your spouse, you will be required to file a gift tax return. However, you will only have to pay a gift tax if your reportable gifts exceed $11.18 million dollars during your lifetime. I do not believe that any of my clients estates’ will be liable for a gift tax.

But beware of the Medi-Cal gifting rules and the 30 month look back penalty period. Some people are of the belief that if they give away an amount equal to the current $15,000 annual gift tax exclusion amount, that this gift will be exempted from Medi-Cal’s 30 month look back penalty period. This notion is incorrect.

The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medi-Cal’s asset gifting rules. While the $15,000 that you gave to your grandchild this year may be exempt from any gift tax, Medi-Cal will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time, should you apply for Medi-Cal within 30 months of the date of the gift.

When a person is in a nursing home and applies for Medi-Cal, the Medi-Cal application will ask whether the applicant has transferred away any non-exempt assets during the 30 months prior to the application date. Transfers or gifts between spouses are not counted. However, if a gift was made to a third party within the 30 months prior to the application date, an eligibility penalty may apply. If the gift was made more than 30 months prior to the date of the application, no penalty will apply. If the gift was made within the 30 month period, divide the sum gifted by $8,841, the penalty divisor, and that is the number of months of ineligibility for the applicant, starting at the month the gift was made. So for instance, if $15,000 was gifted in June, 2018, we divide that number by $8,841. $15,000 / $8,841 = 1.69, which would be rounded down to one month of ineligibility.  As a result, the applicant would be ineligible for June, 2018, but would be eligible for July, 2018. The devisor penalty number is revised annually.

You should also review the language in your revocable living trust and financial durable powers of attorney, to be sure that there is not a $15,000 limitation on gifting, which we commonly see. If you lose capacity, and we are limited to the $15,000 annual amount for gifting, we may not be able to utilize all of the Medi-Cal eligibility regulations, and your ineligibility period for qualification for Med-Cal could be unnecessarily extended.

This information is not to be taken as legal advice, is general in nature, and you are encouraged to see your Walnut Creek Elder Law Attorney.

Michael J. Young

Walnut Creek, CA

1931 San Miguel Dr. Ste., 220

Walnut Creek, CA 94596

925-256-0298

www.WalnutCreekElderLaw.com

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