Question: Would you please provide me with some information re: gifting as it relates to VA planning for Aid & Attendance. It is my understanding that there are no penalties involved for gifting assets in order to reduce resources to approved levels. Mom’s income is less than the medical expenses that she will pay in the assisted living facility, but her assets are a bit too high.
Answer: At this time, gifting does not create penalties (or periods of ineligibility) for the purposes of VA pension benefits. That being said, gifting for VA purposes may create penalties (periods of ineligibility) for the purposes of future applications for Medi-Cal for skilled nursing facilities. Any time you do gifts for VA purposes, you should be structuring a plan that ensures that you will not be creating periods of ineligibility for future Medi-Cal applications.
Often a stroke, hip fracture, heart attack, or some other unexpected medical hospitalization and subsequent discharge to a skilled nursing facility will create a need for Medi-Cal benefits within the look-back period (currently 30 months after the gift was made, or 60 months in the case of gifts to irrevocable trusts, and 60 months for all gifts in the future when the Deficit Reduction Act is implemented with filing of final regulations with the Secretary of the State of CA).
If you have not structured the gifts to create either no period of ineligibility or very minimal period of ineligibility, then you will have shot yourself in the Medi-Cal foot when you do your VA pension gifts. Because the gifting rules for Medi-Cal are complicated, see an experienced California attorney who knows the current rules about gifting. Be sure to ask the attorney if they are experienced in the laws governing gifting under Medi-Cal and if they can structure a gifting program that will not create a period of ineligibility, or that will greatly minimize any gifting period of ineligibility.
Also, if you are thinking of gifting real estate, the rules are even more complicated for purposes of VA pension or Medi-Cal, and you will need an attorney with experience in both areas of law. Any time you gift an asset that has appreciated in value since purchase, there will be tax issues to evaluation, discuss, and account for—income tax issues, capital gains step-up issues, 121 exclusions, property tax reassessment issues, so do not try to do this on your own. Lastly, when someone needs VA pension now, it is not unlikely that they will need Medi-Cal within a matter of months or a few years, so always consider that VA gifts may create Medi-Cal penalties if not structured properly.
The area of gifts for VA and Medi-Cal is not a do-it-yourself proposition. Get good legal advice and guidance.
Dallas Leigh Atkins, Esq.
Law Offices of Dallas Atkins
Santa Barbara, CA 93101