Gifting and the Lookback

Medicaid is a program that can pay for care, whether at home or in a facility. When in need of Medicaid funds to pay for such care, you must submit an application. This allows the Department of Social Services to review whether you have a need for care (the physical assessment) and whether you can afford that care yourself (the financial review). The physical assessment is done wherever the individual in need of care is currently residing, partially so that they can see this person in their everyday environment. The financial review is a meticulous look at five years’ worth of all bank records, to see what happened to the money. Allow me to explain what they will see, and what raises a red flag.

A Medicaid application reviews five years of all financial records, starting from the application backwards 60 months. This includes assets that were in the name of the applicant or their spouse, even if never co-owned. As the application is processed you will also have to provide each new monthly statement until approval is granted. After granting, only the applicant’s financial records continue to be monitored periodically, to see if they kept too much money. The spouse is not reviewed again unless they personally apply for the program later. The Medicaid recipient is only allowed $1,600.00 in savings by the last day of any given month. Their income still goes to them, and if spent on their bills within the month that is fine. If they are in a nursing home their income goes to the facility to offset Medicaid’s costs, unless you can prove a community spouse needs some or all of that income.

The financial review is to see whether assets have been spent on the Medicaid applicant, or their spouse, or if they were improperly transferred. You are not allowed to just give assets away and then ask for Medicaid to cover your expenses. But there are a few gifting options that the law does allow. 1) Gifts to spouse. Anything, at any time, can be given to your spouse. That spouse may have to rearrange the assets so they can then keep them, and there are various strategies for this which is a big discussion for another time. 2) Gifts to a legally blind or disabled child. 3) Gifts to a caregiver child, or another person who has lived with and cared for you for at least 2 years. It is very important that you can prove this was the case, by doctors records. 4) Limited gifts to a minor child. 5) Gifts to a sibling who lives with you. Each rule has its own test and requirements, but those are general rules that allow the applicant to transfer assets during the 5 year review window without consequences.

The annual gift tax exclusion amount is NOT excluded for Medicaid. The IRS allows each person to gift up to $19,000 per year (as of 2026) to every person they so choose, related or not. That is an unreportable amount for the IRS. If you gift $20,000 to one particular person you have to file a gift report to say you gave $1,000 (the amount over the limit). But that is a tax law and has nothing to do with Medicaid. If you want government dollars to pay for your care, you are not allowed to just give away your money, whether the IRS cared about it or not.

Gifts are also not prorated. If you gave a countable gift 1 year ago or 4, it counts the same. Giving away money that you could have used for your own care, unless to an allowed person, means the state will refuse to pay for your care AFTER Medicaid is granted. This is a Medicaid “penalty”. In most cases they do not go after the person who got the gift, they just refuse to pay for the care you need. You had money for your own care, why should the state have to pay for your generosity? It’s only fair. Sometimes gifting that will incur a penalty is actually an intentional strategy to protect funds. But the math should be done carefully, ideally before the gift is given. It is best to get good advice, and know the consequences of your actions before they can’t be undone.

Attorney Halley C. Allaire is principal in the law firm of Allaire Elder Law, a member of the National Academy of Elder Law Attorneys, Inc., with an office at 271 Farmington Avenue, Bristol, (860) 259-1500, or on the web at www.allaireelderlaw.com. If you have a question, send a note to Attorney Halley C. Allaire and your question may be discussed in a future column.