Wednesday, December 09, 2009

We know that, in Michigan, the government will penalize individuals who make divestments (gifts) in the 5 year period prior to applying for Medicaid benefits. But what does the government think about a very common transfer of assets, the Christmas gift?

I've had many clients tell me they annually make cash gifts of $100 or so to their children, grandchildren, etc. Is this considered a "divestment", resulting in a Medicaid penalty? Unfortunately, the answer isn't always clear cut. A strict reading of the law requires that all divestments, including holiday gifts, be reported for the 5 year period preceding the Medicaid application. However, I've spoken with some Medicaid workers who tell me they would not require a Medicaid applicant to report annual holiday gifts.

A divestment requires a gift to made "in contemplation of Medicaid benefits." As most Christmas gifts are made annually (over a period of many years) one could argue a holiday cash gift was not made in anticipation of receiving Medicaid, and therefore not a divestment.

De Minimis or trivial gifts are also not considered divestments. Is a $100 cash gift trivial? I might argue that one or two $100 gifts to grandchildren are de minimis, but that $100 gifts to ten grandchildren are not.

The bottomline: I would never advise a client not to give Christmas gifts if that is their desire. However, I would advise seniors who are anticipating a nursing home stay to be aware that all divestments, including gifts to family members in observance of Christmas, may be reportable if Medicaid benefits are sought.

On that cheerful note, Happy Holidays to you and your family!