If you are asking this question, you must already be aware that you cannot just give money away to lower your net worth and qualify for Medicaid when you need to move into a nursing home. Medicaid has a five-year lookback period and will penalize you if they find that you have gifted money to anyone and applied for Medicaid within that time period. While there is an option in Texas for what’s known as a partial cure by taking some of the money back, it’s probably not the best strategy available. We explain how it works and what your other options might be.

How Does the Medicaid Penalty Work?

First, let’s look at the penalty you face if you have gifted money in the five years before needing a nursing home. The reason behind these rules is to prevent people with financial Elderly Woman Writing on Papermeans from avoiding using their own money to pay for nursing home care. However, the government doesn’t care if you gave money away intentionally for this purpose or you just happened to gift money and then unexpectedly needed a nursing home. It’s all the same to them. An example of how the penalty you will face works follows:

  • You gifted $50,000 to your adult daughter four years ago.
  • The average cost of care in a Texas nursing home the month you apply is $7,000.
  • Dividing the amount of the gift by the monthly cost of care, you get 7.
  • You will not be eligible for Medicaid benefits for seven months from the first day of the month in which you applied.

The penalty does not apply if the money was gifted to a spouse or to someone else for the spouse’s benefit or into a special needs trust for the sole benefit of a disabled child or adult under age 65.

So, what if the giftee gives the money back to you? This is called a cure, and it is an option—but not always a great one.

The Partial Cure or “Half-a-Loaf” Strategy

If the giftee is able to return half of the money you gave them, you might be able to “cure” half of the ineligibility period and have the funds to pay for care until the remaining period expires. So, in the example we gave above, if your daughter had not spent all of the money you gifted her, and she gave back $25,000, you could reduce your penalty period to three-and-a-half months. You could use the returned money to pay the nursing home fees for the remaining time. It’s important to note that only the gift recipient is allowed to cure the gift. Other family members cannot transfer money to you to make up for it. Technically, other family members could give or loan money to your daughter so that she has the funds to cure the gift, but it might not be worth the effort.

Other Options to Qualify for Medicaid

The earlier you talk to a Medicaid planning attorney, the more options you will have for protecting your assets while qualifying for Medicaid. But even if you have recently given money away and are in a crisis situation, there are legal steps an attorney can help you take to shorten Medicaid penalty periods, limit what you have to pay out of pocket, and set aside some money for your heirs. An attorney can help you spend down your assets in a way that is compliant with Medicaid qualification and create a Medicaid Asset Protection Trust to preserve money for your heirs.

Are You Looking for a Medicaid Planning Attorney in Texarkana, TX?

If you are looking for Medicaid planning advice, you need to speak with an experienced Medicaid planning attorney as soon as possible. Contact us online or call our Texarkana office directly at 903.223.5653. We also have offices in Tyler, Paris, Longview as well as Magnolia, AR. We are here to help!


Ben King
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Ben King helps clients in TX and AR with estate planning, asset protection, probate, and medicaid planning.