Another downfall to gifting assets is that the children given the assets may not save for the parent’s needs. When a trust is used to protect assets for long-term care costs, the trustee can access the funds when the time is needed, providing an extra insurance that medical needs can be met.
It is important to consider what can happen if assets are gifted to the children, who spend them or don’t provide access to them when long-term care is an issue. Medicaid has an ineligibility period that is assigned as a penalty for uncompensated transfers of assets in the previous five-years before filing the Medicaid application. So giving assets away to qualify for VA benefits may prevent you from receiving Medicaid when the time comes that it is needed.
Should you be approved for Medicaid, but determined to have a ineligibility period due to gifting assets, you will be required to pay out of pocket for all costs during the period. As a general rule, depending on the state, it comes out to roughly about $9,000 in gifted assets equaling one month of ineligibility. So a gift of $100,000 in assets could mean you have to pay for long-term care costs for over a year before Medicaid will begin paying for the expenses.
Sadly, this is a situation most people learn about when it is too late, and its just one of many traps you can fall into if you do not enlist the help of an experienced elder law attorney when determining how to best handle your assets while planning for retirement or long-term care needs.
