Question: My 93 year old grandfather from North Carolina who is in good health moved in with my family 9 months ago. My (absentee) brother and I are the only heirs. My husband and I are purchasing a new home to increase space for our new family. My grandfather wants to give us $200k toward the house in order to spend down a portion of his cash savings. Should we include him on the deed and homestead him in the new state of Florida or simply receive the money as a “gift”? My husband and I are financially independent and while we appreciate the gift, we do not need the gift to purchase the new home.
Answer: There is a 5 year look back period for Medicaid. Any asset transfers, including gifts, made within this 5 year look back window will trigger a penalty period of ineligibility to receive Medicaid benefits. There are ways to avoid triggering these penalties but an outright gift is not one of the ways.
As an example of the problem with making an outright gift, if your grandfather gifts to you $200,000 today and in 3 years requires skilled care, the gift of $200,000 will render him ineligible for Medicaid benefits for a significant period. During the period of ineligibility he, or you, will have to pay for any nursing home care.
In Massachusetts, the homestead protection will not keep your grandfather’s $200,000 from the reach of nursing homes, but a primary residence is often an exempt asset for Medicaid (Mass Health). In Massachusetts however, the nursing home or skilled care facility will be able to put a lien on your home if you use a portion of his $200,000 gift to purchase the home and put his name on the deed.
However, since you are buying your home in Florida, it may be to your grandfather’s advantage to have him contribute to the new house and count it as his “homestead”. If he requires nursing home care in Florida, it is my understanding that his $200,000 would be exempt, but you should check with an attorney in Florida.
If your grandfather is truly seeking to protect assets from the reach of nursing homes, setting up an asset protection trust is often the recommended option. Creating an irrevocable trust starts the 5 year look back clock as soon as the trust is funded. Once the property is in the trust, your grandfather can make any type of gift or transfer he so chooses without “resetting” the 5 year look back period. In addition the irrevocable trust allows your grandfather to protect ALL of his assets while allowing access to income. As another added benefit, your grandfather’s life savings will be left to his loved ones without the need for probate.
Dennis B. Sullivan, Esq., LLM, CPA
Estate Planning & Asset Protection Law Center of Dennis Sullivan & Assoc.
Wellesley, Massachusetts 02482