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st-joseph
New Member

Closing proceeds /gift

 
1 Best answer

Accepted Solutions
Opus 17
Level 15

Closing proceeds /gift

So the big problem is this: If a person gives away their property or money to make themselves "poor enough" to qualify for government help with assisted living, the government can, in some cases, go after or "claw back" those gifts.

So for example, a person needs to sell their home and go into assisted living.  The house profits of $100,000 goes into their bank account.  Their pension and social security are not enough to pay the assisted living expenses so they apply to Medicaid to cover the difference.  Medicaid says you don't qualify unless you have $3000 or less in the bank.  The person says, I'll be darned if I spend all my house profits on medical care, so I'll give away $97,000 to my family, then I will qualify for Medicaid.  In some cases, Medicaid can take those gifts back from the recipients.

Trusts can be used to safeguard assets from Medicaid, but they have to be done properly.

To your original question, any gift from your mother is not taxable income.

However, it may be subject to confiscation (partial or total) depending on the circumstances.  Your family needs the help of an attorney who works with elder law issues (if the home was in a trust, you may already have an attorney involved, who can easily explain your position to you.)

Good luck.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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18 Replies
Critter
Level 15

Closing proceeds /gift

She or her trust sold the home not you or your siblings.  If the sale was taxable then her or her trust would report the sale not you.

If you have not yet consulted an elder law attorney for medicaid/medicare tax planning you really should ... there is a 5 year look back period on all gifts so this may not have been the best way to handle selling the home.
st-joseph
New Member

Closing proceeds /gift

deleted
xmasbaby0
Level 15

Closing proceeds /gift

By all means, consult an elder law attorney.  And do not start spending a dime of that money.  Medicaid might come after it.
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
st-joseph
New Member

Closing proceeds /gift

deleted
Critter
Level 15

Closing proceeds /gift

Earned income for income tax purposes or for medicaid purposes for you are not the same issues as the 5 year claw back for medicaid/medicare for your mom.   Seek an attorney.
xmasbaby0
Level 15

Closing proceeds /gift

I would NOT be listening to tax advice or advice about what Medicaid might do from a Social Security office employee.  Please see an attorney.
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
st-joseph
New Member

Closing proceeds /gift

deleted
xmasbaby0
Level 15

Closing proceeds /gift

You are welcome.  It can get really complicated when you are dealing with the finances of an elderly parent.  As Critter#2 pointed out, there is a five year lookback in many states if your mom ends up needing to have her nursing home care paid for by Medicaid.  They then look at EVERY record of her finances for the previous 5 years--banking records, tax returns, investments, large purchases, gifts she gave, etc.  There is a "spend down" process for assets that allows certain expenditures such as pre-paying for funeral/burial expenses, etc.  Large gifts of cash, however, could end up being disallowed, and then Medicaid could seek to recover the money your mom gave to you.  You need an attorney to look carefully at the "trust" created and see if it will be ok for you and your siblings.  Hope it all works out for you.
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Carl
Level 15

Closing proceeds /gift

This is scary. There's so many different ways a trust can be set up, and just as many ways distributions from a trust can be "clawed back" by those who may legally be entitled to it.
st-joseph
New Member

Closing proceeds /gift

deleted
Opus 17
Level 15

Closing proceeds /gift

So the big problem is this: If a person gives away their property or money to make themselves "poor enough" to qualify for government help with assisted living, the government can, in some cases, go after or "claw back" those gifts.

So for example, a person needs to sell their home and go into assisted living.  The house profits of $100,000 goes into their bank account.  Their pension and social security are not enough to pay the assisted living expenses so they apply to Medicaid to cover the difference.  Medicaid says you don't qualify unless you have $3000 or less in the bank.  The person says, I'll be darned if I spend all my house profits on medical care, so I'll give away $97,000 to my family, then I will qualify for Medicaid.  In some cases, Medicaid can take those gifts back from the recipients.

Trusts can be used to safeguard assets from Medicaid, but they have to be done properly.

To your original question, any gift from your mother is not taxable income.

However, it may be subject to confiscation (partial or total) depending on the circumstances.  Your family needs the help of an attorney who works with elder law issues (if the home was in a trust, you may already have an attorney involved, who can easily explain your position to you.)

Good luck.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
st-joseph
New Member

Closing proceeds /gift

Thank you. My mother have a long time CPA and attorney and I am just now remembering a meeting we had with all over 8 years ago and they got her covered. She is a WW2 veteran and was stationed at Los Alamo Lab in New Mexico where they made the first nuclear bomb. She is not the type to 'cheat' no matter what. When times are tough she always 'bite the bullet' and tough through it. She is all taking care of. It is I I am worrying more about because I am on social security disability and Medicaid myself. I did report to social security office immediately in person at their office and they said it is a 'gift' and to do whatever I want to do with it. It is not money that I earned or work for they said. As for Medicaid, they told me I would only need to report this annually during ReDe, not in between to report any changes in income or life changes. I just don't know how Medicaid is going to look at this on my next ReDe. I am only 54 and recently went on disability a few months. I just keep track of my spending with what I used the money for like buying a electric scooter for me, new analog hearing aids for me(born deaf), braces for my daughter, fix up my car with numerous repairs, fix up our home, donated to a few charities. and what not. My belief is they might just ask me how I spent the money. I also feel if in my guts I feel something is wrong then I need to worry. If nothing and I feel I am doing everything I should be doing and pleasing to Medicaid and social security with how I spend the money then I am okay with that. After all, why should a person be punished for receiving a gift from a parent, you know? Thank you again.
Critter
Level 15

Closing proceeds /gift

Again ... it is not your benefits or you that is being questioned.  That you recieved a gift is not the problem ... you can spend the gift anyway you want.    It is the medicaid look back rules for your mother that is the issue.  PLEASE talk to that CPA or Attorney to see what the rules are in your state.  If she is "taken care of" then maybe she has Tricare for life and will never need to apply for medicaid/medicare  to cover the nursing home costs ... talk to someone soon.
st-joseph
New Member

Closing proceeds /gift

Thank you. I follow you 100%. My mother do have insurance for helping her to move into assisted living and they pay for her. It is called Genworth which I think is similar to Tricare you mentioned? Medicaid does not pay for her moving and living there, Genworth does, and she had to paid first three months(deductible) and then the insurance kicked in and resume responsibility to pay for her apartment going forward. Medicaid help pay for her medical needs and RX. Her attorney and CPA did a great job making all this happen for her. Thanks. Have you heard of Genworth?
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