It is no secret that senior citizens are the wealthiest part of the U.S. population. We've all read and heard about the trillions of dollars that will 'change generational hands' as the seniors pass their life savings on to their children and grandchildren. Unfortunately, seniors have to compete with a dirty little secret that was put in place by former President Bush's administration when Congress passed the Deficit Reduction Act of 2005 (DRA).
The DRA made harsh changes in the way that the government will punish seniors for acts of charity and family giving. The Medicaid rules assume that when a senior makes a charitable gift, or a gift to a family member, the purpose of that gift was to get rid of some assets in order to qualify for Medicaid nursing home expenses. That's right - seniors are guilty until proven innocent. The burden of proof is on the seniors to show that when they gave money to their church, child, or grandchild, that they had some other reason than to qualify for Medicaid.
Even with the help of a qualified attorney who is not afraid of the Medicaid office, once the senior becomes older and less able to communicate, it may be incredibly difficult to prove that the senior is not guilty of giving their money away to qualify for benefits.
The DRA creates a cruel penalty of ineligibility for Medicaid when a senior who gave away money needs nursing home services at any time within 5 years after the gift. It's a harsh punishment that our government has created for seniors who suffer chronic long-term illness within 5 years after a gift.
Many people confuse some of the tax rules around the gifting of assets with those of Medicaid. As long as the DRA law is in place, seniors must remember that the IRS gift tax rule allowing gifting up to $13,000 tax-free is only a tax rule. Giving away $13,000 may cause a senior to suffer a loss in nursing home coverage of 2 to 3 months if they need such assistance within 60 months after giving that money away.
Most of us have a hard time remembering what we were doing 5 years ago. No one knows the future; think about where you were five years ago, and how little you knew about what your medical situation would be today. Have you had any health care changes that you might not have foreseen back then? Any medical scares, new aches and pains, or maybe you have realized you needed a change in your diet or exercise regimen? After all, how can any of us know what will happen tomorrow, much less five years from now? But thanks to our government, giving may now be hazardous to your health care! We are now held responsible for staying healthy for five years after every gift. Keep that in mind the next time birthdays or the holiday season rolls around!
