Case Examples

Confusing Medi-Cal Rules With Federal Gift Tax Rules

Jean stopped working many years ago in order to provide at-home care for her ailing mother Harriet. Soon after Jean’s husband lost his job, she decided to reenter the work force in order to make ends meet. She informed her mother about these plans and the both of them agreed that Harriet’s best option was to enter a nursing home where she could receive the care that she needed. Harriet was single and her only assets were her home and a savings account of $100,000. One of Harriet’s friends, Ronnie, suggested that Harriet apply for Medi-Cal. Ronnie told Harriet that she could become eligible for Medi-Cal benefits by giving the money in her savings account to her daughter. Ronnie also told Harriet that she could only give $13,000 per year to her daughter because giving beyond this amount could result in a period of ineligibility. Harriet did the math and determined that if she followed Ronnie’s advice, it would take her about 9 years before she could meet Medi-Cal’s eligibility requirements. She could not wait this long to enter a nursing home. So she opted to pay for her nursing home bills with her own private funds. Harriet ended up spending all of the money in her savings account in order to pay for the first 2 years of care she received at a nursing home. Thereafter, she became a Medi-Cal recipient.

Harriet could have preserved the money in her savings account by consulting with an elder law attorney. An elder law attorney would have told Harriet that the $13,000 annual exclusion amount that Ronnie had told her about related only to federal gift tax law and that Ronnie had mistaken this amount for Medi-Cal’s gift transfer rules. The attorney would also have explained the difference between federal gift tax rules and Medi-Cal’s transfer rules and would have designed a gift transfer plan that minimized the amount of time that Harriet would be ineligible to receive Medi-Cal benefits. Medi-Cal currently has a 30-month “look-back” period for gifts and uses a formula for determining a person’s period of Medi-Cal ineligibility. Such period of ineligibility depends on the amount of the gifts that you make and when you make them. If properly done, you can make gifts of certain “exempt” assets that do not result in any period of Medi-Cal ineligibility.

For more on information on Medi-Cal and Medi-Cal eligibility click here.