Will small gifts cause a Medicaid penalty?

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Q. If a senior person is looking to apply for Medicaid and has given various family gifts for birthdays, baptisms, etc. of between $20 and $100 over a five-year look back period, will they be penalized for these gifts? Also, if the person’s assets equal $4,000 and their monthly income is $1,850 how much should be deposited into a qualified income trust account?
— Planning

A. You’re asking about qualifying for Medicaid benefits.

Gifts made within five years of a Medicaid application, regardless of how small or for what purpose, may result in a penalty.

The penalty would affect the date when the person becomes eligible for Medicaid, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

“In order to be eligible for New Jersey’s Managed Long Term Services & Supports (MLTSS) program, the applicant’s assets must be less than $2,000 and his or her monthly income must be less than $2,349,” Whitenack said.

She said income over $2,349 may be deposited into a an irrevocable qualified income trust (QIT).

“Income deposited into a QIT is not counted as income for Medicaid purposes,” Whitenack said. “Funds in the QIT can be used only for very specific purposes, such as health insurance premiums or medical expenses that are not covered by Medicaid.”

The State of New Jersey must be listed as the beneficiary of the QIT upon the death of the Medicaid recipient, she said.

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This story was originally published on Aug. 7, 2020.

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