Gifting property to family members may give you peace of mind as you get older. You get to see your loved ones enjoy these gifts while you are still alive, plus you can keep your treasured items in the family. However, you should be aware that gifting assets may interfere with your possible eligibility for Medicaid.
Smart Asset points out that under certain circumstances, transferring assets for free can run afoul of rules to qualify for Medicaid, which is a need-based program.
The look-back period
To qualify for Medicaid, your assets must be under a specific threshold. If you earn too much in income or have property with a high enough value, you may not qualify for Medicaid.
Even if your current assets are low enough for Medicaid eligibility, Medicaid will usually want to look at your asset transfers going back at least five (5) years. This is known as the Medicaid look-back period.
Conflicts with the look-back period
The goal of the look-back period is to make sure you have not been purposely given away assets just to qualify for Medicaid. In other words, Medicaid does not want you selling property for less than fair market value or giving away property for free. If this is the case, Medicaid may impose a period of ineligibility or Medicaid.
Plan to use your assets carefully
Each individual state has its own rules for determining the penalties for violating the five (5) year look-back period. Knowing this, you may decide to wait before applying for Medicaid until enough time has passed after gifting your assets.
Be sure that your plans line up with the rules of the state in which you are applying for Medicaid, so you do not make yourself ineligible for Medicaid when you need it.