Will I be Penalized for a $100 Birthday Gift to my Grandchild?

By Jerold E. Rothkoff

            As many of you know, if you apply for Medicaid eligibility, you must disclose any uncompensated gifts within five years of applying.  This is known as the five year Medicaid look back.  If you have given away assets or transferred funds to a trust, you may be ineligible for Medicaid for a period of time within the five year time frame.

            There are certain exceptions to the five year look back, such as a transfer to a disabled child, a transfer between spouses, a transfer to a special needs trust, and a transfer of the primary residence to a caregiver child.

            However, not every gift within the five year time frame is for the purpose of reducing assets to qualify for Medicaid.  In some cases, a parent may wish to give a child a birthday or anniversary gift, pay a child’s expenses for helping a parent, or simply withdrawal cash from an ATM and use the funds for entertainment purposes.

            Unfortunately, in New Jersey, the county Medicaid offices take the position that unless the applicant can adequately explain what certain funds were used for, the exchange of cash or a small check will be considered an uncompensated gift resulting in the imposition of a Medicaid penalty.

            In contrast, Pennsylvania has a specific law in place to address small transfers of funds within the Medicaid five year look back period.  In Pennsylvania, a Medicaid applicant or spouse can transfer up to $500 in the aggregate in one month to any individual without being considered a gift within the five year look back period.  The $500 exemption addresses small birthday gifts, gifts to charity, and unexplained cash withdrawals from ATMs.

            It is time New Jersey adopts a similar exemption.  As current president of the New Jersey Chapter of the National Academy of Elder Law Attorneys (NJ NAELA), I have met with several state legislators and government officials in an attempt to have a $500 monthly exemption apply in New Jersey.  I urge those of you who work in long-term care to contact your state legislators and state officials to have them get behind such potential legislation.

            The $500 exemption will benefit all interested parties.  The individual applicants will have an easier time in submitting applications.  The county Medicaid offices will be able to processing applications in a timely fashion.  The nursing homes will receive timely Medicaid reimbursement by the counties processing the applications in a more expedited fashion.

            No potential Medicaid applicant should be denied the opportunity to give a small gift of love to a child, grandchild, or a charity.

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About Jerry

Jerold E. Rothkoff, a practicing New Jersey and Pennsylvania attorney, is the Principal of the Rothkoff Law Group, an elder care law firm. Jerry dedicates his practice to serving clients in the areas of life care planning, long-term care planning, Medicaid & VA benefits, and advocacy for the elderly and disabled. He is past President of the NJ Chapter of the National Academy of Elder Law Attorneys, former chair of the elder law section of the NJ State Bar Association, and past President of the Life Care Planning Law Firm Association. Jerry continues to be an outspoken advocate for the rights of the elderly and disabled. He writes for and gives presentations regularly to attorneys and other professionals about legal issues related to seniors and those with disabilities. Jerry’s community activities include the Twilight Wish Foundation, the Delaware Valley Stroke Council, the Alzheimer’s Association, as well as numerous other advocacy groups. When not in the office, Jerry spends time with his wife, Erica, and their five children, eighteen-year old identical twin girls, Liza and Julia, fifteen-year old fraternal twin boys, Evan and Gregory, and six-year old Aitan.

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