Hope For Haiti — Despair for Mom?
The recent outpouring of support for the victims of the earthquake in Haiti highlights a question often asked about gifting and charitable contributions as it relates to Medicaid. For example, last week Mary called me to ask whether it is OK for Mom to make a charitable contribution to help the earthquake relief effort. You would think that helping out others in need is a good thing, something to be encouraged. Well, the answer is not so clear cut.
Mary’s mom is now living in a nursing facility and is in spend down mode. In her case, she will be eligible for Medicaid in 3 years if she lives that long. But to preserve her right to benefits she must do more than spend down her remaining assets. She must spend in such a way that she receives something of equal monetary value in return. Now, she’ll spend most of it on her nursing care but what about charitable contributions? Does Mary’s mom receive fair value back for the contribution? Or does she make a transfer for less than fair value which will then result in a Medicaid penalty — a period of ineligibility, which, by the way, doesn’t start until she has no more money left?
Certainly, Mom is getting a benefit. She is helping others in need, but that is not exactly something we can put a monetary value on. The same answer would seem to be the case for contributions to Mary’s favorite religious our civic charities. But what if she makes a small gift of, say, $100? Will that cause a penalty?
Applying the letter of the Medicaid rule as written, any transfer for less than fair value, no matter how small, will trigger a penalty. And think about it. If the State goes through 5 years of your financial records (that’s the 5 year lookback), how many of these charitable contributions and other transfers might it find? If we total them up it might turn out to be a pretty big number, causing a few months of ineligibility or more. And, don’t you think, if the State can delay paying for Mom’s nursing home care, at a time when our incoming New Jersey governor, Chris Christie, has declared the State to be nearly bankrupt, it would do so?
On the other hand, if Mom’s charitable contributions are small, infrequent and far enough in advance of her application for Medicaid, they most likely won’t cause a problem. But, that’s what makes the whole long term care system so frustrating. It’s the uncertainty, not knowing what you can or can’t do. That’s why it is so important to seek advice from a trusted advisor first You just don’t want to take the wrong step. In Mary’s case I told her a small gift would be OK. It didn’t make me feel good having to tell her that the government laws and rules in this case discourage charitable giving. But that’s a whole separate discussion for another time.