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Giving Away Assets to Your Children to Qualify for Medicaid

Craig Sunter

Two sisters are fighting over Mom and Dad’s estate. Now, mind you, Mom and Dad are still alive and kicking.

One sister thinks Mom and Dad should give away most of their assets so they can qualify for Medicaid if one or both have to go to a nursing home. The other sister thinks that is a terrible idea and tantamount to bilking the government out of money.

So they come ask me what I think.

I think that when it comes to settling arguments between sisters, I usually try to speak out of both sides of my mouth, then duck.

But let me give it a shot at what I told them…

First, the state does not like paying the nursing home bills of people that have assets.

For years people have adopted a strategy of going broke by choice, giving away assets to children so that they can qualify for Medicaid nursing home benefits. Uncle Sam caught on to this years ago and instituted strict look-back periods of up to five years on any gifts thus given to children prior to entrance into a nursing home.

As a result, today it is much more difficult to simply give away one’s assets just before you enter a nursing home.

Still, astute attorneys experienced in elder law seek to arrange things so their clients can take advantage of every government benefit legally available. And depending on your individual facts and circumstances, this may include receiving Medicaid benefits to pay nursing home expenses.

“But that’s not right,” you may be thinking. “These Medicaid benefits were meant for people who don’t have any money. You shouldn’t be taking that money from the government.”

“Oh, not so fast,” someone else might chime in. “All these years Mom and Dad have been working hard, playing by the rules, saving and paying taxes. Who knows how many of these people are qualifying for Medicaid nursing home benefits because they were irresponsible all these years? And now we’re going to reward that behavior? And

Mom and Dad, who worked hard all these years, are going to have to spend themselves into poverty paying for a nursing home, so they can be just as broke as the deadbeats?”

Well, that’s obviously not a fair characterization of everyone on Medicaid, but as you can see, this issue can get rather emotionally charged.

Frankly, I don’t like either the broke by chance or broke by choice approach as a first choice.

Why not help Mom and Dad be prepared through planning? A financial planner or insurance agent with experience in this area can help seniors evaluate long-term care insurance options to help pay for any long-term care facility needs.

Every elder law attorney I’ve ever worked with says that is the preferred approach when available.

I agree. I have a hard time loving any plan that hinges on Mom and Dad going broke.

On the other hand, not everyone does perfect planning and the need for long-term care can come upon someone suddenly. Long-term care insurance may not be available due to a pre-existing medical condition. A severe illness may begin suddenly, with a stroke for example, but require long-term care in an institution.

Consultation with an attorney experienced in elder law is a wise investment of time and money. Even if the need for long-term care has already come about, there are many cases in which an elder law attorney can provide some avenues for financial relief.

You should at least learn about your options before you decide which path to take.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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