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FAMILY AND ELDER LAW NEWS

A publication by Gary S. Brown of the Family and Elder Law Firm
June 2003

Can Financial Gifts to Children Protect Your Assets from Medicaid?

J oan came to me after her husband, Harold, suffered a stroke. She was obviously distraught. Her daughter, Mary, came along with Joan for emotional support.

"The doctor says Harold needs long-term care in a nursing home, " Joan says. "I have some money in savings, but not enough. I don't want to lose my house and all our hard-earned money. I don't know what to do."

Mary has heard about Medicaid benefits for nursing homes, but doesn't want her mother left destitute in order for Harold to qualify for them. Mary wants to ensure that her father's medical needs are met, but she also wants to preserve Joan's assets.

"Can't Mom just give her money to me as a gift? She asked. "Can't she give away $10,000 a year? I could keep the money for her so she doesn't lose it when Dad applies for Medicaid."

Mary has confused general estate and tax laws with the issue of asset transfers and Medicaid eligibility. A "gift" to a child in this case is actually a transfer and Medicaid has very specific rules about transfers.

At the time Harold applies for Medicaid, the state will "look back" 3 years to see if any gifts have been made. The state won't let you just give away your money or property to qualify for Medicaid. Any gifts or transfers for less than fair market value which are uncovered in the look-back period will cause a delay in Harold's eligibility for Medicaid.

In Louisiana, for example, every $3000 given away during the 3 years prior to a Medicaid application creates a 30-day period of Medicaid ineligibility. So if Harold and Joan give Mary $60,000; Harold would be ineligible for Medicaid for 20 months.

So what can Harold and Joan do? There are a number of steps they can take, ranging from proper gifting strategies to purchasing of an annuity. But the law on this is very complex and the strategies must be strictly followed. An attorney who practices Elder Law can advise the appropriate steps to take to preserve assets from nursing home expense.

Who Gets to Take the Federal and State Tax Dependency Deduction?

I t's February. Bob has been divorced from Jan for over 8 months. Jan is the primary custodial parent of Bob and Jan's 2 minor children. Bob has been paying Jan child support since their separation.

Bob comes to me with a common question from divorcees. Bob says, "I have been paying child support to Jan in the amount of $1500 a month. I don't mind paying for my kids, of course. But I was wondering whether I may take the dependency deduction for my kids on my tax returns?"

Louisiana law provides the answer. Bob may automatically claim the federal and state tax dependency deductions if he does not owe any arrearage on his child support obligation and his obligation exceeds 70% of the "total child support obligation." Or, if Bob' child support obligation is equal to or greater than 50% and equal to or less than 70% of the "total child support obligation", Bob may be entitled to claim the dependency deductions if he files a motion with the court and the judge finds that Bob owes no arrearages and it would substantially benefit Bob without significantly harming Jan. The "total child support obligation" is that obligation set out in the Louisiana Child Support Guideline Schedule of Basic Child Support Obligations. If you have any questions on this or other divorce issues contact an attorney who practices Family Law.

Family and Elder Law News is written by Gary S. Brown of the Family and Elder Law Firm and is for general informational purpose only. It is not intended to, and does not constitute legal advice.

GARY S. BROWN, LLC
THE FAMILY AND ELDER LAW FIRM

400 Lafayette Street, Suite 150
New Orleans, LA 70130
Phone: (504) 561-8700 Fax: 504.561.8707
Web Site: www.GarySBrown.com
Email: garysbrown@abanet.org

"We make your problems our business."