July 29, 2016
What is the maximum amount of money that can be gifted in the MI without a Medicaid look back?
Gifting to protect against long-term care costs is a common question we hear as elder care lawyers. For example:
“I am considering dispersing some of the money in my 92 year old mother’s checking accounts. Can money be gifted to both children and grandchildren? Does small amounts of money throughout the year for birthdays etc. count toward gifting total?”
Gifting, generally is not advised for a variety of reasons.
Gift Taxes in Michigan Explained
There is this idea that you can gift away $10,000 to as many people you want gift tax free. That is true, in fact you can gift $14,000 to as many people you want gift tax free in 2016. That is the annual gift tax exclusion ammount.
On top of your annual gift tax exclusion amount you have a lifetime gift tax exclusion amount of $5million. In other words, if you were to gift over $14,000 to a person, you would have to cut into your lifetime gift tax exclusion amount and fill out a tax form. That said, you would still owe zero gift tax because you’d have the $5million you can give away over your lifetime.
So, in the end gift taxes arne’t the real issue.
How Medicaid Looks at Gifts and The Five Year Lookback
The real issue is how Medicaid and DHHS, which administeres Medicaid in Michigan treats gifts. Medicaid is a program that will pay nursing home costs, there is an asset limit of $2,000 to qualify for Medicaid. You cannot just give your assets away to qualify for Medicaid because there is a five year lookback, where Medicaid looks back five years to see if you’ve made any gifts…and if you have they will penalize you.
How Much Can I Give Away and Still Qualify for Medicaid in Michigan?
So the original question is how much can you give away without DHHS and Medicaid coming after you? The answer is not much. There is no de minimus (sorry, legal term) amount that you can give away and Medicaid will say it doesn’t matter. They can theoretically penalize you for giving away $50 dollars at a birthday or to a charity. Now there are certain execeptions for this and arguements that are available to protect against the penalty, but that said, there is no maximum amount you are allowed to give away.
DHHS also does not care the purpose of the gifts. For example, if grandma gives to the grandkids college education, then suffers a stroke and needs long-term care in the nursing home and wants to qualify for Medicaid. She will be penalized for those gifts to the grandchildren, because DHHS who administers nursing home Medicaid in Michigan, does not care what the purpose of the gift is.
What to do Next About Gifting and Medicaid in Michigan
The next step would be to download our Medicaid Planning Guide to learn some of the basics of planning for Medicaid. In the short report you will learn the basics around gifting and trying to qualify for Medicaid. If you’d like to learn more in person, then attend one of our weekly LifeCare Planning Workshops, where we dicuss Medicaid Planning in Michigan and gifting in more details.