Gifting Money to Elderly Family Risks Medicaid Eligibility: Follow Family Supplementation Rules & Use Special Needs Trusts to Maintain Eligibility

Introduction

Well-meaning family members may want to provide financial support to an elderly relative to help supplement the care they are currently receiving. However, when that family member receives Medicaid assistance, such as assisted living care, there is a legitimate concern that giving them money may compromise their Medicaid eligibility. This article explores how, when and where it is possible to help a family member financially without hurting their Medicaid eligibility.

Medicaid eligibility is a complex topic. At the basic level there are a variety of asset and income limits for eligibility. In many instances, providing additional funding could be seen as supplemental income that might result in the loss of Medicaid eligibility. Thankfully, a variety of techniques exists to provide additional support without risking the loss of Medicaid eligibility, or at the very least, minimize the effect of financial support on reportable income.

 

Sample Scenarios

A daughter would like to provide financial help to her elderly mother who has early onset Alzheimer's and lives in an assisted living facility. Her mother's Social Security and Supplemental Security Income (SSI) isn't enough to cover the cost of a private room in the residence, much less the type of clothes she's accustomed to, or for a computer to keep in touch with friends and family. The daughter has three options, each effecting the Mom’s Medicaid eligibility differently depending on the state in which her mother resides.

1) The daughter could choose to give money directly to her Mom.
2) She could pay for Mom’s clothes and a computer herself, or pay the assisted living facility directly for the difference for a private room.
3) She could establish a third party Supplemental Needs Trust (SNT) that pays Mom’s bills directly.

 

Impact on Medicaid Eligibility

Giving Money Directly

If the daughter decides to give the money directly to her mother and allows her mother to purchase items and pay bills herself, the money will count as unearned income. The increase in unearned income will reduce SSI payments by the same amount. Furthermore, depending how much additional money the daughter gifts her mother, she could disqualify her mother for Medicaid. This is true in all states. In short, the daughter is, at best, wasting her money, since any money she gives will lessen the public assistance her mother receives and, at worst, endangering her mother’s Medicaid eligibility.

 

Purchasing Items & Paying Bills on Someone’s Behalf

If the daughter pays Mom’s bills herself, for example, paying the assisted living community for the difference between a shared and a private room, then the money will be considered an in-kind payment. In-kind payments impact Supplemental Security Income and could lower public assistance payments made to the mother by up to one-third.

Depending on the state in which the mother resides, the daughter’s assistance could also make her mother ineligible for Medicaid. However, in some other states, known as Family Supplementation states, the daughter is allowed to help her mother and her assistance has no impact on her mother’s Medicaid eligibility.

Family supplementation was created to enable families to help in these situations without significantly harming the elderly family member’s Medicaid eligibility. What can be paid for is restricted differently in each state, so while family supplementation is an effective way to give Mom or Dad money to help pay their bills, it could cause some problems. It is best to check with a Medicaid expert in your state before doing so. 

 

State-by-State Rules

As of January 2017, the following states have rules allowing or prohibiting family supplementation. Several states do not clear laws that prohibit or allow family supplementation. In these states, it is best to error on the side of caution and limit assistance until consulting with a Medicaid expert.

State

Policy on Family Supplementation for Medicaid

Alabama

No information

Alaska

Allowed for room and board

Arizona

Allowed for room and board

Arkansas

Not allowed for room and board but permitted for other expenses such as phone and cable

California

Not permitted

Colorado

Allowed for items not covered by the Medicaid

Connecticut

Allowed

Delaware

Allowed

Florida

Allowed when paid directly to assisted living residence / foster care home

Georgia

Allowed

Hawaii

Not permitted

Idaho

Allowed

Illinois

Allowed

Indiana

No information

Iowa

Allowed

Kansas

Allowed for services not covered by Medicaid (KanCare)

Kentucky

No information

Louisiana

No information

Maine

Allowed

Maryland

Not permitted

Massachusetts

No policy

Michigan

No information

Minnesota

Allowed

Mississippi

No information

Missouri

Allowed

Montana

Not permitted

Nebraska

Not permitted

Nevada

Allowed for room and board upgrades

New Hampshire

Allowed on a case-by-case basis

New Jersey

Allowed for room and board upgrades

New Mexico

Allowed

New York

Not permitted

North Carolina

Permitted to pay for a private room

North Dakota

Allowed

Ohio

No policy

Oklahoma

Allowed

Oregon

Not permitted

Pennsylvania

Permitted for items not included in the room and board rate

Rhode Island

Not permitted

South Carolina

Not permitted

South Dakota

Not permitted

Tennessee

Allowed for room and board upgrades

Texas

Allowed for amenities not included in the room and board rate

Utah

Allowed

Vermont

Not permitted

Virginia

Allow for goods and services, but not allowed for room and board

Washington

Allowed for items not covered by Medicaid

Washington DC

No policy

West Virginia

Allowed

Wisconsin

Allowed for room and board and other items not covered by Medicaid

Wyoming

Allowed for room and board

 

 

Using a Supplemental Needs Trust

If the daughter sets up a third-party Supplemental Needs Trust for her mom, then the daughter can put money into the trust, and the trust can pay for any goods or services not covered by Medicaid, such as clothing and technology, and it will have no effect on the Mom’s Medicaid eligibility. Whether or not the Trust can be used for the cost of a private room depends on the state, as described above.

A “third-party” Supplemental Needs Trust (SNT) is a legal trust created for the benefit of a disabled person, typically over 65 years old, to enhance their quality of life while maintaining eligibility for government benefits which are funded by assets of a person other than the beneficiary, such as a family member. SNTs are traditionally not included as countable assets for Medicaid eligibility purposes (which, depending on each state, are limited to no more than $2000 for an individual, or $3000 for a couple), and thus, SNTs are an excellent option for those looking to help an elderly family member.

SNTs have a variety of limitations. Funds are distributed by a trustee (the person in charge of the trust) and are paid directly to the third parties who provide the goods or services. Funds can only be used for supplemental items for beneficiaries (those for whom the trust was created) such as clothing, transportation, technology and travel. SNT funds cannot be used to purchase food, towards shelter costs, or for medical care which Medicaid would otherwise cover. Finally, the “remainder beneficiary” (the entity that receives the remaining funds once the beneficiary passes away) must be Medicaid.

If you or one of your family members is thinking about providing additional financial support to an elderly loved one, even if they are not currently on Medicaid, it is highly recommended that they contact a specialist who can help decide the best course of action that protects your elderly family member from losing Medicaid or prevents future difficulties in obtaining Medicaid.